Not so very long ago, ruthless debt collectors used humiliating and harassing methods to try to squeeze payments out of consumers. Embarrassing post cards, abusive calls at all hours of the day and night, calls to the workplace, calls to friends and family members, and publicly published lists of debtors were among the tactics that collection agencies used to strongarm people into forking over money.
The Fair Debt Collection Practices Act, a statute added in 1978 as part of the Consumer Credit Protection Act to protect consumers from abusive, deceptive and unfair debt collection practices, is at the center of a wave of lawsuits by consumers that have been dragging debt collection lawyers into court for violating the law.
Among the reasons: mistakes in court filings made by those who purchase debt from creditors but frequently lack enough information to avoid making false statements in pleadings, and debt collectors that are filing cases with inaccurate information or filing after the debt's statute of limitations has expired.
There were more than 69,000 consumer complaints made to the FTC about debt collectors in 2006, which is more complaints than the FTC receives about any other specific industry. This was an overall increase of 3.8% over 2005.
How does this impact you - the consumer?
Recent court decisions in fair debt cases are causing a great deal of anxiety among debt collectors and creditors. Increasingly, debt-collection lawyers are relying on what's called the "bona fide error defense" - claims that the mistakes are unintentional and occurred in spite of the debt collector's best efforts to avoid them. But this defense is being successfully challenged in a number of cases. What exactly is a "bona fide error"? This remains unclear.
The National Law Journal reports that a recent federal court decision that denied litigation immunity to a debt-collection law firm creates more risk for debt-collection lawyers.
The FTC is currently examining the law, which hasn't had a major overhaul in its 30-year history, to see if it is out of step with industry developments. Stay tuned.
