http://www.msnbc.msn.com/id/14503387/ "... Felipe Reyna says all he did was answer his cell phone. After that, he was bombarded with calls demanding he pay a $1,300 debt. The only problem? “It was somebody else's debt,” says Reyna. ... Reyna says the debt collector threatened to call his neighbors and tell them he was a deadbeat. But he was never called by his title, “Your Honor.” Reyna’s a judge on the Texas Court of Appeals. “If these folks can do it to an appellate court judge, what do they do to the plain old blue-collar worker out there that perhaps only has a high school diploma?” he asks. The answer is on hours of recorded calls now being investigated by federal authorities. " Most illegal abuse is verbal, not written, for obvious reasons.
http://www.lawpoint.com/files/NYT-article-070506-abusivedebtcomplaints.pdf Collection industry position: "... J. Brandon Black, the chief executive of Encore, said, "The vast majority of fraud or mistaken-identity complaints and concerns are taken care of at the level of the issuer." ..." The collection industry assumes the debt is valid because the original creditor sent it to them. Even if this was true, the proportion of bad debts, relative to all bad debts in collection, that are erroneously collected from either the wrong party, or from a victim of id theft, is far higher than that proportion relative to all accounts handled at the original creditor stage. But the collection industry presumption may be patently false. http://msnbc.msn.com/id/3087443/ Reality: "... A massive study of 200 million new credit card, checking account and cell phone accounts opened during 2001 — with participants like Citibank, Dell, Bank of America, and T-mobile — shows that 7 out of 8 identity thefts are mis-categorized as simple credit losses by lenders. ..." Most defaulted accounts resulting from id theft are passed on to the collection industry as "bad debts". The OC dumps them before recognizing them as the fraudulent accounts they are. This is a large sample size study. Numbers don't lie. In other words, bad debt portfolios are "enriched" relative to the population of accounts at the original creditor phase, with erroneous or fraudulent accounts. They are further "enriched" with erroneous collection data as error-prone skip-trace data is added to accounts in collection. Continued collection and sale of portfolios of long out-of-statute debt only compound this problem, as erroneous accounts continue to be passed around instead of terminated. Result: http://www.lawpoint.com/files/NYT-article-070506-abusivedebtcomplaints.pdf "... Officials in New York City, which has some of the most stringent consumer protection laws in the country, said the number of local complaints about debt collectors more than doubled in three years — to 900 in the 2006 fiscal year, which ended on Friday, from 774 in 2005, 509 in 2004 and 422 in 2003. ..." Exponential growth in complaints indicates the regulatory and legal sanctions available are inadequate to limit the abusive practices that are driving the complaints. Abusive collection "works", therefore in the absense of adequate penalties, it appears to be growing in practice. We can expect this exponential growth to continue until such sanctions increase sufficiently to affect the profitability of the most abusive part of the collection industry. The behavior of the part of the industry that acts in compliance with law is irrelevant to this trend as long as they are producing a decreasing proportion of the exponential growth in complaints. They will, however, have to live with the legislative consequences of their non-compliant competitors activities.
Thanks, very interesting. Perhaps they will see what consumers go through when His Honor tries to get the CRA's to remove the TL from his reports.
This is great info!....and this just further proves that oc's and ca's are lazy, and don't care what paper they're pushing to eachother...as long as there's money to be made. I can't wait to see how that judge handles his case!
The degree of responsibility and care the various parties take is driven by their determination of their costs and risks of loss. To the OC, a fraudulent account, or a misidentification resulting from the original debtor skipping IS the same as a bad debt, in loss terms. They dump the loss for whatever they can get, but wanting to no longer spend another dime on an "asset" that is no longer theirs, they have no interest in cleaning up the mess. It is like a polluter who dumps a truckload of garbage periodically in the creek. It is not their problem since someone else gets stuck with it. That is why with illegal dumpers, society has imposed penalties sufficient to discourage that activity. If those penalties were insufficient, we would raise them until they reduced the illegal activity. Same goes for speeding tickets. If we are getting too many crashes from excessive speeding, we just raise the infraction penalty and most people drive more carefully. Instead, with debt collection and debt reporting, the collector has NO liability until the consumer disputes, and even then the penalties are inadequate to limit the growth in the illegal activity. When fraudulent collection occurs on a massive scale, as happened with CAMCO, after several years the regulators are able to step in, but any compensation recovered, if there are even sufficient assets, does not make the damaged consumers whole. We have thus seen that as the junk debt collection market and industry grow, complaints of illegal collection activity grow with it. The industry measures its "compliance success" in terms of complaints per total accounts, but for the spill-over damage caused by misidentified or fraudulent account collection, that is the wrong metric. Bad out of statute accounts have a longer life now, and are handled by increasingly non-compliant collectors where such activity pays off. We can thus expect to see such collection complaints rise with the overall growth of such accounts, a situation that the collection industry finds acceptable, while producing an increasingly intolerable shift in costs to the rest of the public. The CRA databases used in credit decisions are increasingly polluted with erroneous negative information, and as the level of activity rises, the existing mechanisms to correct and clean up the problem do not keep up. It is kind of like if a feed lot and slaughterhouse opened in your part of town. If it was small enough, a given level of polution control might be adequate, but if it expanded to 10 times that size, that same level would be entirely intolerable and the place would be closed as a public nuisance. The argument that the pollution per unit cow is no worse than it was originally is bogus in terms of that public cost/benefit determination. The private right of action under FDCPA and FCRA was intended to produce compliant behavior on a case by case basis before major problems arose requiring regulatory action. But this depends on access to the courts, which in practice depends on the economic costs of litigation. There is in effect a threshold below which damaged consumers have a no-win choice. The case by case decisions to engage in illegal collection activity made by debt collectors reflect this situation. There is thus inadequate incentive to act legally, or properly resolve erroneous collection cases, since there is insufficient cost to the collector for failing to do so. We thus see what you would expect if the cost of a speeding ticket were dropped below the level that effectively deterred speeding: lots of speeding, punctuated by crashes. Furthermore, it is not self-correcting like other markets, where bad products or service result in a decrease in business, benefitting the companies who provide better products or service. Abusive collection is a business advantage relative to those debt collectors who do not engage in it.
