Friday, March 09, 2012

Lawsuits soar against debt collectors

Consumers aren’t ceding to debt collectors without a fight.
The number of federal lawsuits filed against debt collectors in the Dallas-based Northern District of Texas has seen a steady increase since 2006 when 13 were filed. By 2009, that figure had risen to 49. They then jumped to 118 in 2010 and 134 last year.
The local figures are a microcosm of how consumers nationally feel about debt collectors.
Complaints about debt collectors ranked second last year among total consumer complaints to the Federal Trade Commission.
Part of the problem is that “with the bad economic times, people are getting more in debt and less able to pay their bills,” said Dallas attorney Frances Smith, who represents corporate creditors and debtors.
But there also have been many cases of unscrupulous debt collectors using unfair or deceptive tactics to try scaring people into settling up.
“I don’t think the abuses are occurring at the creditor level as they are on the third-party debt collection level,” said Smith, a lawyer at Shackelford, Melton & McKinley LLP. “It’s when your debt is sold off to a third person and they’re collecting it.”
The debt collection industry said the FTC report tells only part of the story.
“We take consumer complaints seriously and agree on the significant importance of protecting consumers against businesses that engage in deceptive, unfair or abusive practices,” said Pat Morris, chief executive of ACA International, which represents debt collectors.
“However, the FTC’s report doesn’t explain several relevant underlying factors contributing to the increase in the number of complaints against the third-party debt collection industry,” Morris said.
For one thing, FTC complaints don’t necessarily equate to bad behavior, ACA said.
“While the FTC simply tallies consumer complaints, the agency admittedly does so without investigation into whether the complaint is actually illegal or a violation of the Fair Debt Collection Practices Act,” the group said. “It therefore cannot be assumed that all complaints equate to actual bad behavior.”
Secondly, “The significant increase in volume of delinquent...