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What Happens When Consumers are Abused in Debt Collection?
A pair of recent cases offers hope of accountability
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If you’re a consumer who has fallen into debt with a creditor, you may be looking for answers.
Unfortunately, what you often get from debt collectors is harassment and intimidation.
A final step can be as egregious as a collection lawsuit or the repossession of your car.
However, in a number of cases, the collectors filing suit don’t have proper standing or adequate documentation to justify the claims.
These suits, then, are one more way collectors attempt to get borrowers to pay — often for debts or amounts that aren’t even owed.
A pair of recent stories highlights two cases where creditors or collectors are being held accountable for their aggressive (and sometimes illegal) actions.
One Collection Law Firm Popular with “Big Credit” Files Tons of Junk Lawsuits
The CFPB announced it is bringing an action against the law firm of Forster & Garbus for illegal debt collection practices, including the filing of junk lawsuits designed to intimidate consumers into paying claims.
“Forster & Garbus bombarded its customers with sketchy lawsuits on behalf of big lenders like Discover and Citibank,” said CFPB Director Rohit Chopra. “The CFPB will be scrutinizing large financial companies that enlist debt collection outfits operating lawsuit mills.”
The CFPB noted that the firm filed some 99,000 collection lawsuits over a 5-year period and that the firm had proper documentation for only a small fraction of those suits.
The CFPB has ordered the firm to stop filing suits unless they are reviewed by an outside party and is also threatening a fine.
For the consumer:
If you are served with a debt collection lawsuit, you should always respond in writing and request a debt verification letter and any other documentation supporting the claims made in the suit.
Send your response by certified mail and send a copy to the court clerk where the suit was filed.
If the firm lacks proper documentation, they can’t secure a judgment against you.
Often, these firms count on intimidation in order to force consumers to pay — sometimes even for debts that are no longer owed or for amounts that exceed the consumer’s obligation.
It’s also important that you show up if a court date is noted — failure to appear can result in a default judgment against you.
It may also be advisable to consult a consumer protection attorney if you’re the subject of a debt collection suit.
For Some Car Buyers, a Car Loan Crashes into a Nightmare
Car buyers across the country may be familiar with the tactics of auto lender Credit Acceptance. Many report a nightmarish experience with the company — including interest rates in excess of 22%, aggressive collection tactics, and improper repossession of vehicles. In some cases, Credit Acceptance set borrowers up to fail in order to gain the vehicle and/or initiate collection procedures.
Now, the Consumer Financial Protection Bureau (CFPB) and the New York Attorney General are taking action to hold Credit Acceptance accountable.
“Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can’t afford to repay,” said CFPB Director Rohit Chopra. “The CFPB and the New York Attorney General seek to halt Credit Acceptance’s illegal practices and make consumers whole.”
A 40% Failure Rate
Setting up borrowers to fail: Credit Acceptance ensured its own profits by providing loans without regard to whether borrowers could afford them. For almost 4 out of 10 loans, Credit Acceptance predicted that it would not be able to collect the full amount financed by the loan. Credit Acceptance profits even when borrowers are unable to pay their loans in full by using aggressive debt collection methods. As a result of Credit Acceptance’s practices, customers faced late fees, repossessions, auctions, post-repossession collection efforts, lawsuits, and ruined credit profiles.
The joint lawsuit filed by the CFPB and NY Attorney General seeks to provide relief for consumers and provide a civil money penalty designed to stop Credit Acceptance from engaging in these tactics.