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Government Report Says Buying and Selling Debt Causes Anti-Consumer Mistakes

February 10, 2010

Our Fontana debt collection attorneys are not big fans of the practice of buying and selling debt. This is a standard practice in the debt collection industry, in which an original creditor like a cell phone company writes off a debt as bad, then sells it for pennies on the dollar to a dedicated debt collector. That sale can be repeated many times. According to a Feb. 3 article in The Kiplinger Letter, a Government Accountability Office report (PDF) says this practice causes serious problems for consumers. Because information goes missing when debt information is passed from hand to hand, debt collectors can end up collecting debt that's already paid, discharged in bankruptcy or belongs to someone else. The article suggested that this contributed to 2009's sharp upswing in debt collection complaints.

Thanks in part to the GAO report, the article said, the FTC is scrutinizing the debt collection industry more closely than before. Not only is the agency requesting information on how debt buyers do business, but it's enforcing the law more aggressively. That includes requesting bigger legal settlements as well as holding debt collection leaders personally responsible for violating the law. Action by lawmakers may be next, the article said. In fact, the GAO report called on Congress to make several changes to the Fair Debt Collection Practices Act. The law should be updated to require debt collectors to keep information accurate enough to verify debts, the report said. Congress should also update the FDCPA to reflect new technologies and give the FTC rule-making authority.

As Chino Hills unfair debt collection lawyers, we like these recommendations very much. The lack of documentation caused by debt resales can lead to serious problems, because debt collectors generally don't trust debtors. When a debtor says he or she is not the original creditor, or that the debt was paid off, collection agents may assume it's a lie and just keep on calling. In fact, because the information is missing, debt collectors can use lack of proof as a shield against accountability for knowingly calling people who don't truly owe debts. Requiring collection agencies to keep proof of the debt on hand will allow people to exercise their rights under the FDCPA. And giving the FTC rule-making authority will allow it to update the law to deal with innovations like text messaging, more quickly than the political process in Congress generally allows.

Howard Law PC represents clients who are ready to fight back against overreaching, law-breaking and harassing debt collectors. The FDCPA and a similar California law outline specific behaviors that are prohibited for debt collectors, and other actions that they must take if requested by the debtor. Among many others, these include restrictions on whom and when they may call; a prohibition against lies and foul language; and a requirement that the debt be validated on request. Most people don't even realize they have these rights and debt collectors know it. That means some of them feel free to break the law and violate our rights in pursuit of profit. Our Buena Park debt collection harassment attorneys help clients fight back with FDCPA lawsuits, collecting up to $1,000 plus attorney fees from violating firms.

If you believe a debt collector has stepped over the line with you, don't hesitate to call Howard Law. We offer free, confidential case evaluations to all potential clients. To set one up, please contact us through our Web site or call 1-800-872-5925 toll-free.