Incentives For Debt Collectors to Abuse and Harass Debtors

Incentives For Debt Collectors to Abuse and Harass Debtors

In 1978, Congress passed the Fair Debt Collections Practices Act (FDCPA). That act extremely debt collectors from engaging in harassing and abusive conduct in order to collect debts.

It was a problem then; it is nevertheless a problem now. According to the Federal Trade Commission, 2008 saw a rise in complaints of 10 percent over 2007. (The total for 2008 was 78,838; for 2007, 71,004.) That isn’t the only year there has been a rise. In fact, since the passage of the FDCPA, the numbers of complaints of unfair or abusive debt collection practices made to the Federal Trade Commission have risen every year. The fact is that since the passage of the FDCPA claims of abusive and harassing conduct from debt collectors has risen steadily.

You’d think that a law targeting certain practices of debt collection agencies would average that they would change those practices. But the statistics say different.

Why is this?

The evidence indicates debt collection agencies did make changes after the passage of the FDCPA. They had to take notice of the act and respond to it seriously because of the possible for liability. Though many of the situations are for much smaller amounts, in 2009, for example, one Montana jury returned a verdict of $311,000 for violations of the FDCPA-and that didn’t already include attorney’s fees. That verdict, and many others, show that debt collection agencies who violate the FDCPA can be forced to pay money damages for their conduct. That is possible liability.

So debt collection agencies couldn’t ignore it and many of them haven’t.

So why all the complaints nevertheless?

There are two reasons for this:

1) the incentives in debt collection are wrong, and
2) the people are ignorant of the rights they have when they deal with debt collection agencies.

Many collection agencies have instituted programs to aim their bill collectors on compliance with the FDCPA. They aim them so that the debt collectors will know what is legal and what is not when they contact people to get them to pay their debts.

So far so good.

But something happens between that training and the time bill collectors start contacting debtors who owe money.

So what is it?

It is money. What happens is money. Debt collectors work on an motive program; the more money they bring in for the agency the more money they make. In other words, the more they bring in, the fatter their paycheck is. To bring in that more money for the agency, the FDCPA is often thrown out the window.

It’s more effective collecting money that way. After all, to threaten to sue or to threaten to call the police and put you in jail or to threaten to take your paycheck or your character or to threaten to talk to your friends or to your employer or to subject you to ridicule or abusive language or telephone calls at all hours-all of these and many more are just too effective to pass up. A person scared of losing what he has or of losing his job or reputation is going to move heaven and earth to get the money to pay off the debt. And that is exactly what the collectors want– that you pay the debt quickly and move heaven and earth to do it. Those threats are the motive to get you to pay that will cause their collection numbers to rise and that method a fat paycheck.

And who’s going to know anyway? Most people who have been placed under harassing and abusive debt collection practices won’t know their rights anyway. They won’t know anything about the FDCPA or about the kinds of rights they have under it. And they won’t know that they can sue for violations of the law by debt collectors either. And they won’t know anything about the rights they keep up under the law or about any kind of enforcement action they might bring to vindicate those rights and retrieve damages for them. They are simply ignorant about any of this.

For example, in that Montana case mentioned above, a debt collection law firm filed a lawsuit on an expired claim for a debt. During the time of the suit it was discovered that that firm filed thousands of claims each year in court and that 90 percent of those claims ended in default judgments against the persons they filed suit against. What this method is that the person who was sued, the person who allegedly owed the money, didn’t answer the claim and didn’t appear in court. And whether the claim against them was good or not, whether it was legal or not, whether the filing or the collection efforts violated the FDCPA or not-none of this would ever be known because the people just gave and let it go. They let it go and then had to confront garnishment of wages and/or attachment of character.

They all ignored it, that is, except for this one man and some others. This man-these people– hired lawyers and filed a suit for violations of the FDCPA. And they won. It is important to know your rights under the FDCPA when a debt collector contacts you. You cannot enforce them if you don’t know them.

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