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A Classic Debt Collection Story

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Last week I asked email newsletter subscribers for their experiences with debt collection agencies. I’ve been fortunate never to have crossed paths with a debt collector so I was looking for stories to help put me in the shoes of those who have.

I read about stories of people paying off debts but through some clerical error, the debt was incorrectly sold to a collector. I read stories about legitimate debts that suddenly went to a collector and stories of people who simply didn’t pay up.

If you thought debt collectors only went after “deadbeats,” you’re wrong. There are as many stories of people current on their debts as there are those who are behind.

Here’s one story and Craig’s advice on what he would’ve done differently:

I have had a bad experience with a debt collection agency. I was behind in my payments to [a credit card company]. I worked with a debt management company to get my interest rates reduced on other cards and make payments through the debt management company, but [this credit card company] was the only company who refused to participate in the program. They would not reduce the interest and would not accept payment through the management company.

They set their loan collection agency on me, and these people were horrible. I was told I had to pay immediately or they would take me to court. After initially being really shaken up, I reviewed the “credit card bill of rights” that I found online, and the next time I spoke to the guy, I told him I was familiar with my rights. He backed off somewhat after that.

Then there were the daily phone calls to my home and work, until I finally told him to stop calling because I was working on pulling together the money to pay it.

He stopped, but then on the day I had promised to FedEx it, he called me to make sure I was going to do it. I wrote them a check and FedEx’d it, just like I said I would. Then I found out that rather than cash the one large check (for approximately $10,000), the company made two unauthorized withdrawals from my checking account and then charged me for doing so.

When I called to complain, they told me that they couldn’t accept a check that large (although no one had told me ahead of time), so they had to take it from my account. I pointed out that I had never authorized them to remove money from my account and that they had broken the law.

The person I spoke to said fine, do you want us to put it back? At that point, I was feeling so harassed and tired of the whole process that I just wanted to get it over with and so I said no. But to this day I regret not saying yes, and then filing a police report against them.

What would Craig, our anti-debt collector, have done?

Yes, you have not had a good experience with debt collectors, and I wanted to impart a few things you could have done differently and some things that you may be able to do now.

First of all, if a company won’t take your payments, I would not push the issue. At some point, they will come around and play ball if they want to get paid.

As far as the collection agency, if this happened less than a year ago, you need to sue them. If not, then the statute of limitations has passed, but you will be wiser next time.

As far as things you can do differently, if you ever get a call from a collector or anyone you might need to reference again, record the call! Many Nokia cell phones have recorders built in to them. You can get recorder attachments from Radio shack for around $100 including the recorder and connections for a typical phone. There are cell phone connection devices as well. For smart phones there are also recording apps and software that you can download. Lastly, you can record from skype as well. I don’t care how you do it, but you need to have the capability to record the call! Trust me, you can thank me later.

Secondly if you are in a one party state, which most states are, you do not have to tell them you are recording and you should not tell them you are recording. Resist the temptation. Let them violate away and sue their butts off.

Third, kudos for looking up the credit card bill of rights, but you should become more familiar with the FDCPA and your state law equivalents. Google consumer protection laws and your state and see what requirements and penalties are in place. Does your state require bonding? A license? Does this company have one? If they are not compliant, the money they took from you was illegally gained and you have every right to get it back.

Now, as far as what you can do now:

  • When you told them to stop calling and they called you back, that was a violation of your rights under the FDCPA, and they owe you at least 1,000 in statutory damages, plus arguably whatever you paid them. State law may impose enhanced damages under deceptive trade practice laws doubling or tripling your damages.
  • If they called with an auto dialer or pre-recorded voice, that likely violated the TCPA as well. They owe you $500-1500 per call.
  • The unauthorized withdrawals are fraud/theft, and you again have a legitimate claim against them for that. To add insult to injury, they charged you for the unauthorized transactions. I would sue them on principal just for that. Unless you agreed to the charge, it is an unauthorized fee, and I believe they are just trying to pad their profits.
  • I wouldn’t entertain any of this business about not being able to take a large check. I would call them back and demand every penny to be repaid. Like today.

You can probably see why I asked Craig to author a series on how to deal with debt collectors, right? :)

{ 40 comments, please add your thoughts now! }

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40 Responses to “A Classic Debt Collection Story”

  1. Wow, I’ve never heard of a debt collector agency withdrawing money from your account without your authorization! You can now turn the whole thing around and go after them for such a violation of the law!

    I have a friend in Hong Kong who woke up one morning to a very large man with a very thorny bat at his apartment one day last year. It wasn’t pretty.

    • econobiker says:

      Most agencies will hit your bank accounts for the money as soon as they get your account number and information. The first rule of paying off debts is to use cashier’s checks or money orders for any payments.

      The second rule being get everything in writing, make copies of everything sent, and send everything via certified mail with return receipt…etc

      • daemondust says:

        Yes, that is definitely how they got the routing and account numbers. I do like your suggestion of using an instrument that isn’t tied directly to your account. I wonder if they would be dumb enough to try that trick with a cashiers check too.

  2. zapeta says:

    I would definitely want Craig on my side if I were in a situation where I was dealing with debt collectors.

    • Jim says:

      See why I asked him to guest post all these debt collector fighting articles? :) The guy has a ton of wisdom matched only by his generosity.

  3. lostAnnfound says:

    How did the debt collection agency get the info on his account? And could he hold responsible the bank/CU, etc., that has his checking account for letting unauthorized withdrawals be made?

    • Jane says:

      I’m guessing from the bottom of the check he sent them it has the bank routing # his account # and I’d guess they had all of his personal info. from the debt. (SS#, DOB)

  4. daemondust says:

    Why did you (or Craig) redact the company doing this? There’s no reason to, as far as I can tell, and it’s a disservice to your readers who might be involved with this company.

    • Jim says:

      I didn’t want the focus to be on the company but the situation, because it happens to a lot of people.

      • daemondust says:

        Fair enough, but I see this everywhere and it drives me nuts. This company has done wrong, and they aren’t being pointed out for it. Yes, virtually every other company in the industry does the same, but that isn’t an excuse.

        • Jim says:

          I will call out companies when it makes sense to, the point of this wasn’t to call out a company but point out how consumers can protect themselves from predatory companies such as this one.

  5. Dark Angel says:

    Excellent post. I don’t think there’s nearly enough talk about this, and this post highlights a lot of the bad very potently.

  6. daemondust says:

    Without seeing at timeline of this, I’m left to wonder if it isn’t too late to file that police report, etc. and smack them down hard.

    • codename47 says:

      I would argue that the unauthorized removal of the money falls under theft/fraud which usually has a longer statute of limitations.

  7. Meoip says:

    I’d go after them in court. My personal rule is to never pay a dime unless the collecting agency can produce the signed agreements I had with the other company and they can prove the debt. The credit card company probably didn’t send them much of the paperwork just a request and a history. Don’t pay until they get you the paperwork.
    A company I worked for closed and re-opened under a new name. I was hired by the new company to do the bookkeeping. I started getting phone calls trying to collect on an ad we ran in the newspaper, since I was new I didn’t know about the ad. I asked the collecting agency to send me a copy of the original bill and a copy of the ad, they said they would send them over. A few days latter they called back again asking for the money, I asked for the copies, again. It took 3 requests to get them to confess they didn’t have the bills or a copy of the ad. I kindly explained if they couldn’t show me the ad existed I wasn’t going to be able to pay. Seeing their case falling apart they offered to settle for half, I said “no” and they hung up. They never called back.

    • codename47 says:

      I’d have some fun with that. Tell them you looked in your records and you overpaid the account by $5,000 and want a refund.

  8. Manshu says:

    Great advice, which I hope people won’t need to use. Very specific and actionable.

  9. NewPerspective says:

    I’m going to be in the minority with what I’m about to say, but I always try to put myself in “the other persons shoes”. The credit card customer who wrote the original letter willing borrowed money under terms that he agreed to. He then defaulted on payment (apparently several times) costing the credit card company money in lost interest, billing, collection, etc. This business loss is inevitably passed on to other customers through higher rates, fees, etc.

    Now I’m not trying to justify potentially illegal actions by the debt collection company. Nor am I trying to make light of the debtor’s situation that led them to this point (because I honestly don’t know the conditions that caused him to fall behind in his payments).

    But…

    I truly grow weary of “demonizing” the credit card industry when they are often simply a business that is trying to recoup money loaned to their customers. Money loaned in good faith that it would be repaid under the terms of the agreement with their customer. In a very real sense, they were wronged… and were the first victim in this transaction.

    • daemondust says:

      Yes, they were wronged first. I don’t think anyone here is disagreeing with that. The problems came when they started being abusive.

      A reasonable company (like all the others he owed money to) would negotiate, knowing that he can’t pay what he originally agreed to, but still wants to continue paying them what he can. Getting some money back, all the money owed and a little less interest, has to be better than getting none, right?

    • codename47 says:

      I disagree with the whole “lost money” aspect of it. CC Companies run models and know generally what to expect on a given portfolio and price it accordingly. The loss isn’t passed on, it is collected up front by everyone.

      I have no sympathy for the credit card companies. At all. They aren’t simply trying to recover money they loaned out. They are trying to screw as many consumers as possible. Just take a look at Advanta for example.

      I tell ya what. The collector can deduct whatever the consumer owes from the maximum damages owed to the consumer and forward that amount to the CC company to make them whole. Fair is fair, right?

      • NewPerspective says:

        Understood… the truth is, all businesses “pad” the prices of their products to account for a certain percentage of theft, loss, etc. However, basic economics dictates that if a credit card company had fewer defaults over time, they could afford to lower their rates, fees, etc. That is, theft and defaults DO cost everyone.

        In response to your second paragraph, let me ask you this question. Why? Why would a business entity seek to “screw as many consumers as possible”? What advantage is that to them?

        In paragraph 3, exactly what monetary damages do most consumers receive on credit cards debt collection?

    • econobiker says:

      Problem is that some credit card companies own the collection agencies so they make the money both ways…

      • NewPerspective says:

        LOL… Well, that’s one way to look at it. They’re still only collecting the money due to them anyway, regardless of whether they’re getting it through the credit card company itself or the collection agency. And in my experience, they usually DON’T get the money… or at least not all that is owed to them by the borrower.

        If you put yourself in the lender’s shoes, it’s not hard to see who’s really getting ripped off here. I used to loan money on a peer-lending web site. Despite careful scrutiny on my part and screening every loan, almost 1/4 of them declared bankruptcy or defaulted when the economy went south. I view that as money STOLEN from me that I will never recoup. At best I get a modest tax write-off which for me works out to about 5% of my total loss.

        • Hardon says:

          Well thats your fault for loaning your money out to strangers online

          • NewPerspective says:

            It is my fault that I took at measured risk in loaning money (all lenders do regardless of the borrower). In that sense, I’ve accepted my loss and have still probably done better than the average investor in the current economy!

            It is not “my fault” that the borrower more or less stole that money from me after a contract was in place between us to repay it.

            This is really a tangent though and has nothing to do with the point I was making.

  10. Karen says:

    I have always paid my bills promptly and have never had a delinquent debt. However, I have had to deal with debt companies twice for unfounded claims, and it’s very frustrating to be accused when you don’t owe anything, plus there’s the risk of damaging one’s credit record. I’m currently dealing with a phone company that I canceled service with several years ago, but about every 6 months they send a bill, and it is a mess to convince them each time that I am not a customer! This time they turned it to a collection agency, and when I disputed the bill, they sent a copy of the bill from the company and said that was proof that I owed the money! I’ve filed a complaint with the FCC. Is there anything else that can be done when you don’t owe money? The debt company won’t answer their phone.

    • daemondust says:

      They have proof you had service at one point. Do you have proof you canceled it? A disconnect order? A bill saying it’s final? A receipt saying your final bill was paid in full? If you moved, do you have proof of when you moved and told them to disconnect? I’m afraid the onus might be on you to prove your service was (requested to be) terminated.

      Your local PUC might be able to help more than the FCC.

      • Karen says:

        Daemondust, you make a good point about having proof of cancellation. Everyone should probably always do that, although I wonder how long something like that should need to be kept – that’s the frustrating part, since we could be swamped with saved paperwork forever. Debt collectors are not pleasant, and my experience is that they listen only to the side of the party that hired them. Fortunately, I did keep the letter the company wrote to the FCC and to me 18 months ago, saying they had found the problem and were canceling the number. The debt collector is choosing to ignore that letter. Thanks for the PUC tip. At this point, I’ll try anything. This is over a 7 cent bill that with fees is up to $11. Silly amount for either party to bother with, imo, but for my part, I will not pay for something I do not owe – plus it would only be a matter of months before I’d get another bill from this company!

        • daemondust says:

          Unfortunately, the answer is probably ‘forever’. You can’t know when a company is going to go back and audit their records and think you owe them money or ‘upgrade’ their billing system and have a mishap with old accounts. 7 years seems like a common time frame, but I have nothing to back that number up.

          As stated in the article, you can tell them to stop contacting you, and they have to comply. I believe the only contact they can have with you after that is sending you a ‘we’ve received your request for no contact’ letter and notice that they’re suing you.

          Of course, they can sell the debit to a different company and the harassment can begin again.

          Half a page down is an article on what constitutes verification of a debit. They almost certainly can’t provide enough validation to convince a judge, and they know this. They count on you not knowing your rights or not remembering the exact details and considering that, perhaps, you really do owe the debit and want to be ‘responsible’ and pay it.

          All that said, these debits of a few cents seem to pop up a lot, and often truly are ‘valid’. I say ‘valid’ because from my experience they tend to be from improperly prorated bills that show up when a company audits their books and realizes they’re missing hundreds or thousands of dollars spread out between thousands to hundreds of thousands of former customers. I’m not saying that’s the case here, or that these are truly valid debits. If a company says I’m paid in full, then I should be. It’s their problem if they made a mistake calculating the final bill.

          • codename47 says:

            “I’m afraid the onus might be on you to prove your service was (requested to be) terminated.”

            Nope, sorry guys. The onus is on the collector to prove that a debt exists not for the consumer to prove the debt doesn’t exist.

            “Of course, they can sell the debit to a different company and the harassment can begin again.”

            Then you can double the fun in court!

          • daemondust says:

            I want to believe you. I truly do. But they have proof of service. If I don’t have any evidence to support my side, order of cancellation, etc, then I doubt I can convince a judge to go along with me.

            I agree with you that it should entirely be on them to prove the debit, but without anything to invalidate their ‘proof’ I don’t think I could get very far.

    • econobiker says:

      Let me guess, Palisades Collections or similar? That place is well known for filing false reports to the credit agencies that you still owe money on an old phone account or even if you never had an account.

      • codename47 says:

        “But they have proof of service. If I don’t have any evidence to support my side, order of cancellation, etc, then I doubt I can convince a judge to go along with me.

        I agree with you that it should entirely be on them to prove the debit, but without anything to invalidate their ‘proof’ I don’t think I could get very far.”

        But judges aren’t going to care if you paid or not. The FDCPA regulates debt collector behavior, not consumers. The validity of the debt is immaterial.

  11. kenyantykoon says:

    don’t you find it weird that these credit card companies will literally force the plastic down your throat but when it comes to getting their money, they will follow you to the ends of the earth. if they have to??i was recently reading in msn.com that they are now using facebook to track down defaulters. that is one of the reasons that i avoid them like the bubonic plague

    • NewPerspective says:

      Kenyantykoon,

      Just some food for thought. If someone had thousands of dollars of your money and suddenly stopped paying you, wouldn’t you do everything possible to recover it? ;-)

  12. Great post! Unfortunately, many people would not even investigate their rights.

    • daemondust says:

      It’s depressing that many people don’t only not know their rights, they’ll actually believe the lies the abusive debit collectors tell them.

  13. Tami says:

    So what about a company that auto dials your home even after you have called them to tell them you don’t know the person they are looking for. I have had First Assurance calling my home looking for someone with the same last name as myself, but I do not know the person they are looking for. They left a voicemail. I returned the call, sat on hold for about 10-15 minutes, told them I didn’t know anyone with that name, and asked them to remove my number from my list. I have continued to get messages from them almost daily, thank God for caller ID, because even when I do pick up their isn’t a person there. So, what are my options?


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