Consumer advocates are calling for tougher restrictions on debt collecting practices, as many people still struggling in the aftermath of the recession get back on their feet and try to become current on debt payments. As we have noted in past posts, the Consumer Financial Protection Bureau is strengthening regulations on debt collectors on the federal level, but upcoming regulatory changes aren’t of benefit to borrowers who are facing collections today.
One of the major problems facing borrowers in Florida and around the country is court action by debt collectors. In addition to harassing phone calls and threatening letters, debt collectors often go to the courts to get an order against a borrower who is delinquent. Debt collectors often seek an order against the debtor and permission to pursue income and assets to satisfy the debt.
In some cases, default judgments occur when a consumer doesn’t respond to their summons, which often happens when people aren’t aware that they’re the subject of a lawsuit. This raises questions about whether the collectors are properly serving process, which means that notice must conform to statutory requirements. This means different things in different states, but it’s safe to say that anywhere in the country the debt collector must use reasonable means to notify the borrower.
Once a default judgment as been entered against an unknowing borrower, the creditor can start garnishing wages and pursuing assets in satisfaction of the debt. This can be shocking for borrowers who aren’t expecting to have their wages garnished or who don’t understand what has happened, and it can also create a very difficult financial situation for families who aren’t able to access paychecks to pay more current bills.
Creditor harassment is also a major issue for Florida borrowers who are behind on their payments. Harassment often starts when the original creditor (the bank that issued the credit card, for example) sells the past due credit to a debt collection agency. Debt collection agencies pursue sometimes ruthless tactics such as calling many times in a day, calling a person’s workplace, or calling family members and harassing them about the unpaid debt.
Source: MPR, “Consumer advocates say abusive practices by debt collectors on the rise,” Jessica Mador, Jan. 15, 2013.