A Consumer Win

Anyone who’s ever been hassled by debt collectors calling incessantly to collect a debt, especially one that’s not even owed, will be glad to learn that the Department of Justice and Federal Trade Commission, a consumer protection agency, have been working together to rein in some of the worst debt buyers. In United States v. Asset Acceptance, LLC, a suit brought in the U.S. District Court in the Middle District of Florida, in Tampa, the defendants have agreed to a settlement which imposes a fine of $2.5 million and a number of changes in their business practices.

Asset specializes in purchasing old consumer debts from other companies, and then holding and collecting on these debts over a long period of time. According to the complaint, as of Sept. 30, 2010, Asset held more than 34 million individual accounts with an original value of more than $42 billion, making it one of the nation’s largest debt buyers and a market leader.

The Department of Justice, according to Tony West, Assistant Attorney General for the Civil Division, hopes that this settlement will help set the standard for appropriate behavior by other players in an industry that’s really only taken off in the last ten years. Since the Fair Debt Collection Practices Act hasn’t been updated in about three decades, it’s likely that the newly organized Consumer Financial Protection Bureau will be looking at how to strengthen the law.

In the mean time, perhaps the most important part is a requirement that debt collectors notify consumers in writing of their intent to provide information to credit rating agencies, so consumers can challenge any errors at the outset, instead of discovering them when they need to take out a loan.

According to the complaint, many of the debts Asset purchased are outside of the statute of limitations and consumers have no enforceable legal obligation to pay that debt. In some states, consumers can reset the statute of limitations if they promise to pay the debt or make a partial payment on the debt. Asset is alleged to have collected on this so-called “zombie” debt without informing consumers that these debts were not legally enforceable, or that in making a partial payment or promise to pay, they may have unwittingly breathed life back into these debts.

This is an important point, but perhaps not entirely clear. What it means is that when time has run out on collecting a debt and the collector can no longer bring a suit in court, if a person makes a payment in response to a request, he can inadvertently start the clock running again. And, since the statutes of limitation vary in the different states (the limit can be anywhere from 3 to 10 years), consumers need to inform themselves. The information is quite readily available, including on this web site. In the settlement, Asset agrees not to take advantage of this restart provision and not penalize people making a good faith effort to pay their debts.

The settlement also requires other changes to Asset’s business practices that create safeguards for consumers. For example, the company must conduct a reasonable investigation into the legitimacy of a debt when it becomes aware of a consumer dispute or if the company who sold a debt to Asset provided unreliable information about the original debt. The company can no longer consider undelivered mail to constitute notice that information about a consumer is being reported to a credit reporting agency or repeatedly contact third parties in a way that violates the Fair Debt Collection Practices Act.

If $2.5 million seems like a paltry amount, I guess we have to content ourselves with the fact that it is really hard to put a company in jail. It hardly seems fair, especially on a day when we learn that Georgia is routinely putting parents in prison for failing to pay child support. 845 in the month of October alone.

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Monica Smith

Monica Smith writes Hannah's Blog. Born in Germany, she came to the United States as a child, living first in California, then after an interval in Chile, in New York. Married to a retired professor at the University of Florida, where she lived for 17 years, she moved to St. Simons Island, Georgia, in 1993 and now divides her time between Georgia and New Hampshire. (New Hampshire, she says, is always interesting during a presidential election.) She and her husband have three children and five grandchildren. Ms. Smith says she "learned long ago that I am not a good team player when I got hired at the Library of Congress, fresh out of college with a degree in political science and proficiency in four foreign languages, to 'edit' library cards and informed my supervisor that if she was going to insist I punch the clock exactly on time, my productivity was going to fall from being the highest to being the same as everyone else's. The supervisor opted to assign me to another building where there was no time-clock. After I had the first of our three children, I decided a paycheck wasn't worth the hassle."