Unfair Practices by Unscrupulous Debt Collectors

Know Your Protections Against These Prohibited Practices

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A man in Lewisville, Texas is threatened with eight voicemails full of expletives and racial slurs. Another person is targetted with embarrassing envelopes depicting a cartoon hand holding a man by the ankles and shaking money out of his pockets. In another case, a mother gets threatened with the unearthing of her daughter's body.​​

These are some of the tactics that unscrupulous debt collectors use to bully marginalized people, often beaten down by life, who think that no one will believe them, and if they do, no one can stop the harassment or provide any relief.

Debt Collectors Behaving Badly

An informal perusal of reported cases will uncover instance after instance of collectors:

  • posing as law enforcement officers ready to execute on non-existent warrants
  • claiming to be lawyers ready to file lawsuits they have no right to file
  • calling dozens of times at all hours of the day and night
  • using profane and racist language
  • threatening to do physical harm to the consumer, family members, and pets
  • disclosing past due debts to neighbors, relatives, employers, and coworkers

A lawsuit filed by the Federal Trade Commission against a collection operation in Texas is, unfortunately, typical. This collection agency went by a number of different names, a common tactic used in the collections industry to make it difficult for consumers and others to track the players. The names included Debtcom, Inc., Harris County Check Recovery, Inc. and The G. Wright Group, Inc. One of the company’s names was Goldman, Schwartz, Lieberman & Stein.

On its website, this is how Goldman, Schwarz advertised its services to lenders:

The last call your debtor wants is from a lawyer's office giving them the legal alternatives if they don't pay you! Our legal staff will remind the debtor of the ramifications a lawsuit may involve, such as depositions, liens, writs of execution, and the waste of time and money spent on their attorney's hourly billing.

Specializing in commercial collections, the legal staff of our legal collection office will approach your debtor from the legal point of view not allowed to traditional collection agencies.

Read the FTC’s original complaint.

All of those claims, however, were untrue. The company was not a law firm, did not have a legal department, and employed no legal staff. But Goldman Schwartz did not stop there. It employed and expanded on the law firm ruse routinely to intimidate the borrowers from whom it had been hired to collect debts. Among its egregious behaviors, Goldman Schwartz:

  • Identified itself as a law firm to borrowers
  • Called its victims criminals
  • Threatened to have borrowers arrested and prosecuted by the non-existent Houston District Attorney
  • Told borrowers that they were having warrants issued for their arrest
  • Told borrowers their children would be put into the custody of the police or child protective services
  • Threatened to file civil lawsuits and to take away the borrower’s property
  • Threatened to contact the borrower’s employer to accuse the borrower of check fraud 
  • Contacted employers, military superior officers, neighbors, and relatives, disclosed the debt and even attempted to intimidate the non-debtor into paying the debt for the borrower
  • Ignored the victim's’ requests for verification of the debts and ignored the victim’s evidence of payment
  • Used profane and abusive language

    Each of these actions was illegal. The US District Court entered an order permanently enjoining this operation from ever again engaging in collection activity and entered a monetary judgment against the defendants in the amount of $1,412,888.

    How Many Complaints and Lawsuits Are Filed Against Unscrupulous Collection Agencies?

    Unfortunately, the cases above are not isolated events. According to Webrecon.com, in a nine-month period spanning January 1, 2016, through September 30, 2016, people filed 29,793 debt collection complaints with the federal government’s Consumer Financial Protection Bureau. During that same period, consumers filed 8027 lawsuits under the Fair Debt Collection Practices Act, 2930 under the Fair Credit Reporting Act, 3712 under the Telephone Consumer Protection Act. Plus, many more complaints are filed by consumers with their state’s attorney general’s office and lawsuits filed under states’ debt collection statutes, deceptive trade practices acts, and privacy statutes.

    In fact, the problem is so widespread, the Federal Trade Commission maintains a list of banned debt collectors. The people and companies on the list have been prohibited by federal court order from carrying on collection activities. The list includes the name of the offender and links to the banning order and a description of the case.

    Fair Debt Collection Practices Act

    Unfair collection activities are governed by a number of statutes. The most prominent and widely used is the federal Fair Debt Collection Practices Act (FDCPA). Other handy federal laws include the Fair Credit Reporting Act and the Telephone Consumer Protection Act. Most states also have statutes that regulate collection activity within their borders and directed at their citizens along with other useful tools like deceptive trade practices statutes.

    Who Must Follow the FDCPA?

    The FDCPA applies to debt collectors, not the original creditor collecting on its own behalf. Therefore, if the collector works directly for Mammoth Department Store, the FDCPA will not apply. The FDCPA was designed to regulate collection agencies that contract with the creditor to collect for a fee or a percentage and anyone, whether or not they’re a collection agency, that buys delinquent accounts.

    Debt collectors are required by law to identify their companies. But what’s to keep an underhanded collector from saying he works for Mammoth Department Store, when he actually works for Deadbeat Collections? Not much, and it happens all the time.

    What Collection Practices Are Prohibited?

    What kinds of acts are prohibited under the FDCPA? Prohibited acts as set out in the FDCPA fall into several broad categories: 1. They cannot harass; 2. They cannot give false statements; 3. They cannot engage in unfair practices.

    Listed below are some examples of the types of actions the FDCPA prohibits. This is not an exclusive or exhaustive list. Debt collectors are very cagey and skilled at what they do and often manage to just skirt around these examples. But even the nicest of collectors will be hit upon a complaint or lawsuit if he calls the borrower 20 times in one day, or if he calls your grandmother repeatedly when he can't reach you.

    No Harassment. Collectors cannot harass debtors or third parties. For instance, the FDCPA prohibits a collector from:

    • threatening to use violence or harm
    • publishing a list of names of people who have not paid debts (except what they can legally disclose to credit reporting agencies)
    • Using obscene or profane language
    • repeatedly using the phone to annoy a debtor
    • calling the borrower at inconvenient times, such as before 8:00 am or after 9:00 pm

    No false statements. Collectors cannot lie to debtors or third parties. This includes:

    • claiming to be attorneys, government representatives or law enforcement if they are not
    • claiming that you have committed a crime
    • claiming that they operate or work for a credit reporting company
    • misrepresenting the amount owed
    • claiming that papers they send a borrower are legal forms, like subpoenas, lawsuit papers or arrest warrants
    • claiming that papers they send a borrower are not legal forms, when they actually are, like settlement documents or binding agreements

    Debt collectors also are prohibited from saying that:

    • the borrower will be arrested for not paying a debt
    • the collector will seize, garnish, attach, or sell the borrower’s property or wages unless they are permitted by law to take the action and intend to do so
    • the collector will take legal action against the borrower when the collector has no legal right to take legal action or no intention of taking the action

    Debt collectors may not:

    • give false credit information about the borrower to anyone, including a credit reporting company
    • send the borrower anything that looks like an official document from a court or government agency if it isn’t
    • identify the collector’s employer as a false company name

    Unfair practices. Debt collectors may not employ certain practices that the FDCPA considers to be particularly unfair. For instance, a collector may not:

    • try to collect any interest, fee, or another charge on top of the amount owed  unless the contract that created the debtor or state law allows the charge
    • deposit a postdated check before its time
    • take or threaten to take the borrower’s property unless it can be done legally
    • contact the borrower using a postcard