The car loan may have never gotten paid off completely. But by declaring bankruptcy, John James Feary had resolved the debt through the court system.
Or so he thought. Calls to his iPhone demanded repayment several years after the Broken Arrow man's 2003 bankruptcy filing.
"I know one day in particular, they called him three or four times in one day, and that's not uncommon," said Mark Craige, Feary's attorney.
Craige helped Feary avoid the unpleasant calls by filing a lawsuit under the Fair Debt Collection Practices Act. In November, the case was closed, with a judge granting Feary $1,000 -- the statutory damages amount typically awarded in such a case -- as well as payment of his attorney's fees.
What did the company, America's Recovery Solutions, LLC, do wrong?
"We wrote them a letter that said 'stop,'" Craige said. But the company continued with the phone calls.
Not everyone who feels the wrath of debt collection agencies files a lawsuit, of course. Just as certainly, many debt collection agencies follow the law outlining what behavior is proper and what isn't.
But with debt collection becoming a massive industry -- about 30 million Americans, or 14 percent of everyone with a credit report, owe an average of $1,500 in debt subject to collection, according to the Consumer Financial Protection Bureau -- the federal government has stepped in to provide new oversight.
The bureau, a newly created entity formed after 2010 financial reforms, now oversees debt collection agencies, part of a broad scope of its powers. The bureau will oversee about 175 debt collectors, companies each taking in more than $10 million yearly, according to a bureau statement from October. Combined, these companies make up roughly 60 percent of the industry's consumer receipts.
Three main types of debt collection fall under the new regulations: "firms that may buy defaulted debt and collect the proceeds for themselves; second, firms that may collect defaulted debt owned by another company in return for a fee; and third, there are debt collection attorneys that collect through litigation," according to the bureau.
Tulsa attorney Mac Finlayson has given seminars on the Fair Debt Collection Practices Act, still a way for consumers to get relief if they are truly being harassed by debt collection agencies. He said it's hard to know for sure if the new oversight will have much impact compared to previous regulations efforts.
"I think they will have more of a hands-on approach to debt collection than the Federal Trade Commission did, for no other reason than there was so much on the FTC's plate to begin with," Finlayson said.
Can the new oversight make a difference for those being hounded -- perhaps unnecessarily -- by debt collection agencies?
"It will be difficult," Finlayson said. "It has everything to do with funding. If they have the funds to hire the people, then they can probably do that. I think probably they're going to have to act much like the FTC did and react to complaints that are filed."
He said debt collection practices can be plagued by inaccurate data.
"Particularly when you have a large volume lender, the inaccuracy of their records is legendary," Finlayson said.
Such debts often change hands in business transactions, with some debt collection agencies basing their whole business model on buying debt for pennies on the dollar in hopes of collecting enough to turn a tidy profit.
"There's a whole market out there for what is called dormant obligations," Finlayson said. He explained that "there are people getting calls for collection of credit card debt where the statute of limitations has run." But if consumers begin to pay these dormant debts, the clock starts anew on their financial obligation -- and the debt collectors reap the reward.
Sometimes there's a lack of documentation for the original debt. "In terms of written documentation, it's been stepped on so many times in the pipeline of being dumped and sold ... that the paperwork doesn't exist anymore," Finlayson said.
Finlayson represents those collecting debts, not consumers. None of his clients have been sued for illegal practices, he said.
He freely acknowledged the other side of the industry, however. It's wrong to claim someone will go to jail for not paying a debt, for example. Phone calls cannot rise to the level of harassment.
"There are what I call sweatshops, where you may have 50, 60 people in a room, each one with a telephone or a bank of telephones making collection calls," Finlayson said. In such an environment, "those are the people who are driven to do those types of things and say things that aren't true and be aggressive that step over the line."
According to the Federal Trade Commission, for example, debt collection agencies are not allowed to phone people at work if a person tells them they wish to not be contacted on the job. Phone calls are also not allowed "at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it," according to the FTC.
If consumers have a problem with debt collectors, Finlayson advised to send a cease-and-desist letter. One area of focus for the new bureau will be to try to ensure that the debt collection agencies "have a consumer complaint and dispute resolution process." This may involve more focus on making sure that debts are property documented before collection hounds go after consumers.
Another area of the bureau's focus is on the accuracy of the agencies' data and making sure they are properly disclosing the amount of debt owed. The bureau also states it will work to ensure that collection agencies communicate civilly with consumers.
Craige said another option for consumers is to hire an attorney.
"If the debtor is represented by a lawyer, you can tell debt collectors I'm represented by a lawyer ... and they're supposed to stop contacting you," Craige said.
More information for consumers on debt collection practices is available at consumerfinance.gov.
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