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Debt Collection Rules Tighten May 9, 2011

Posted by CredZoo - Tame Your Credit in New Credit Information.
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By Russell Grantham

The Atlanta Journal-Constitution

Last month, Hattie McKinney sued a collection agency that she said had been calling her Powder Springs home for nearly a year over a $300-plus cellphone bill that she disputes.

“They kept calling me and calling me, about 20 times a day,” said McKinney. “It kept me a nervous wreck.”

Finally, the 69-year-old woman sued the Minnesota-based agency, alleging violations of a federal law that bars collection companies from using harassing calls and other bare-knuckled dunning practices.

If she wins in the federal district court in Atlanta, she could collect at least $1,000 in damages, plus legal costs.

Meanwhile, the calls have stopped. That was “the best thing,” said McKinney.

Thirty-three years after the Fair Debt Collection Practices Act was penned, skirmishes between debtors and collectors are being played out more than ever across the nation.

Consumer complaints about debt collectors rose 17 percent last year to 140,036, according to the Federal Trade Commission, the agency with primary responsibility for enforcing the law. The number of grievances have tripled since 2002, and are the most common gripe the agency hears, accounting for 27 percent of all complaints.

While the federal Fair Debt Collection law isn’t intended to block firms from collecting legitimate debts, it does aim to stop abusive practices, such as using harassment, lies or intimidation to bully people into paying.

This summer, debt collectors could come under even more scrutiny as a new agency joins the Federal Trade Commission in investigating complaints of violations.

Starting July 21, the Consumer Financial Protection Bureau will be looking into complaints about errant bill collectors. The federal watchdog agency was created by a law enacted last year.

“The agency will have all kinds of power to set rules,” said Emory Clark, managing partner at bankruptcy law firm Clark & Washington in Atlanta. The FTC can investigate complaints, but can’t write rules to address new technology, such as cellphones, e-mail and voice mail. Those conveniences allow collectors to communicate more easily with debtors and create more potential for abuses and violations.

The new bureau will have authority not only to write new rules on how debt collectors deal with consumers, but to hear and resolve complaints, said Valerie Hayes, general counsel for ACA International, a trade group representing about 5,000 debt collectors, attorneys and investors in the debt collection business.

“The collection industry is going to have two regulators,” she said.

Struggle on both sides

The new agency will be stepping in at a time when both debt collectors and their quarry have been facing some tough years recently.

Collection calls and complaints have soared for a variety of reasons, but that hasn’t necessarily translated into bigger collections, say consumer lawyers, the FTC and players in the collection industry.

Credit card companies, hospitals, cellphone companies and other creditors have increasingly sold their delinquent debts to outside firms rather than using their in-house staffs to collect old debts.

With that, debt-collection activity rose as more companies got into the collection business. Computer software made it easier for even small firms to pursue payment of old, charged-off bills that they often bought for pennies on the dollar.

At face value, collectors bought $110 billion worth of debt in 2005 — 90 percent from credit card companies, according to ACA International. In 2007, they recovered $6 billion on such debt.

But in the wake of the recession and financial crisis of three years ago, both debt collectors and consumers have struggled, and the debt market has stagnated.

The biggest factor driving growing complaints, say some, is increased desperation of both debtors and collectors.

“A lot more people are having to confront collectors,” said Kris Skaar, with Decatur law firm Skaar & Feagle. “Plus, people are much more aware of their rights because of the media and the Internet.”

Firms are chasing people who often have lost their jobs and have little money to repay old debts, said Clark. For now, he added, “the collection business is not all that good.”

The pressure on firms may, in turn, be driving some collectors and their employees to cross the line when calling debtors, he said.

Hayes, with ACA International, disagrees. Collectors need debtors’ cooperation, she said. “It isn’t in the debt collectors’ interest to bend those rules,” she said.

What’s at stake

Meanwhile, the stakes of the battle between debtors and collectors are rising.

In March, a Marietta collections firm reached a $2.8 million settlement with the Federal Trade Commission, one of the commission’s largest enforcement actions ever against a debt collection agency. The firm, West Asset Management, didn’t admit wrongdoing as part of the settlement, but agreed to extra monitoring and other measures for five years. A West Asset spokesman declined additional comment.

FTC said in court filings that the firm’s debt collection practices “generated thousands of complaints” with the FTC, Better Business Bureau, state regulators and the company.

The agency said the company, which employs about 1,500 debt collectors in 13 states and overseas, made repeated, harassing phone calls, often using obscene language; falsely claimed to be a law firm; and falsely threatened debtors with lawsuits, property seizure and arrest.

The company sometimes tapped debtors’ bank accounts and credit cards without their permission and ignored its own internal program that identified employees who were violating the law, the FTC said.

West Asset Management, which provides debt collection services for hospitals, telephone companies, consumer credit firms, government agencies and other clients, must send written notices to debtors, spelling out their rights under the federal law. It also will require its employees to sign notices acknowledging their duties and potential liabilities under the law.

The firm’s parent company, Omaha-based West Corp., reported a $34.6 million profit in the first quarter but also said its net worth is negative $2.5 billion.

In a filing earlier this month to the Securities and Exchange Commission about a planned initial public stock offering, West Corp. disclosed the FTC’s enforcement action, but not the $2.8 million civil penalty.

The Top 5 Tips For Good Credit March 15, 2011

Posted by CredZoo - Tame Your Credit in About CredZoo, Tips For Good Credit.
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Blogger Todd Ossenfort has been known as “The Credit Guy” for the past three years. Now he’s hanging up his mouse and keyboard and leaving his readers with his top 5 tips for good credit. We’d like to share them with you here!

1. Saving is essential to avoid unwanted and often problem debt. If you don’t have an emergency savings account of six to 12 months of income saved, start today. Save whatever amount you can regularly (each pay period) even if it is only $25. As you get in the habit of saving, increase the amount as you can afford to do so. Save something every month, even if you are struggling to pay down debt.

2. Never co-sign, especially for a family member. Generally speaking, if a lender is not willing to loan money to someone, you shouldn’t either. Co-signing for a loan or credit card for another person is a great way to ruin a valuable relationship — and your own credit. If the person can’t or won’t make payments, your credit will suffer and you will be held responsible for paying.

3. Check your credit report annually. Place a reminder on your calendar and get your free credit report each year.  Reviewing your credit report at least annually will help detect identity theft early. It’ll also help insure there aren’t any inaccurate entries on your report. When you work with CredZoo, this is done for you. One less item to worry about! CredZoo has a free credit report analysis. We can look at your reports and see if we can help you before you sign up.

4. Avoid using credit to extend your income. Living within your means is key to avoiding large credit card debt. If you are using credit each month to pay for essentials, you need to take a hard look at your monthly spending and make cuts to bring your spending in line with your income. Simple budgeting 101.

5. Know your rights when dealing with collectors and use bankruptcy protection when it is needed — and only if it is needed. Learn your rights under the Fair Debt Collection Practices Act and keep collectors from intimidating you into promises you can’t afford to keep.

One of the rights you are given under the Fair Credit Reporting Act (FCRA) is to challenge inaccurate, misleading and obsolete items appearing on your credit report. CredZoo uses every venue available under the law to help you assert these rights. Disputing items on your credit report is your legal right. When you use CredZoo to help repair your credit, we are abiding by and using all federal and regional laws regulating third party credit repair assistance.

Contacts us today for more information on any of these 5 tips or to learn more about CredZoo’s services and the FCRA: 1-888-881-5333