Americans with overdue debts usually face a daunting parade of punishments. First come the threatening letters. Then the relentless phone calls. And often, if debts remain unpaid, consumers end up in court, sued by collectors who hope that a favorable judgment will allow them to garnish wages or seize assets.
Fed up with what they call harassing tactics, a growing number of debtors are now suing debt collectors first. Arming themselves with consumer protection laws outlined in the Fair Debt Collection Practices Act, or FDCPA, they go after collection agencies for a wide range of violations, such as automated phone calls, which are illegal, that give debt collectors a bad reputation.
"The decline of the economy is causing bill collectors to become more and more aggressive, and people are getting more desperate," says Steve Katz, a former debt collector who now runs a chat board called Debtorboard for aggrieved consumers. He points out that consumers who have lost their livelihoods often have little choice but to fight off debts in court.
There were 8,347 consumer lawsuits filed against collection agencies in 2009, a 55 percent increase over 2008 and double the number filed in 2007, according to the FDCPA Case Listing Service, an organization that tracks lawsuits.
Some consumers are first-time plaintiffs, who suddenly find themselves unable to pay debts and feel wronged by aggressive collectors. Others, usually with debts worth tens or hundreds of thousands of dollars, sue repeatedly in the hope that favorable judgments will get collectors off their backs. Debt collectors sometimes refer to these consumers as "credit terrorists."
Laura Cinquino from Hasbrouck Heights, N.J., who was laid off from two jobs as a medical assistant last year, is a debtor who found herself in a vicious struggle with a collection agency following what seemed like a simple misunderstanding. Cinquino, who was also attending college to become a registered nurse, hadn't paid a $600 credit card bill with Washington Mutual when the bank collapsed in the financial crisis. When WaMu was taken over by JPMorgan Chase, Cinquino said, her bills started to arrive in Chase envelopes. Cinquino, who said she usually pays her bills online, disregarded the letters thinking they were related to her auto loan. So when she received a voice mail from a bill collection agency one day, she did a double-take.
Mistakes Happen"I was surprised," she said. One of Cinquino's central complaints was that according to her, the collection company, Apex Financial Management, never offered her proof that it was entitled to collect . "I had no idea who they were," she said. Cinquino has now hired a lawyer and said she wanted to sue.
Apex Financial Management declined to comment on Cinquino's case.
Spokespersons for the collection industry said that companies adhere closely to FDCPA laws, but that mistakes sometimes happen. They argue that the law is sometimes not clear on certain practices, such as whether or not it's legal to leave a voice mail.
"In some states you're found in violation (if you leave a voice mail) and in other states, it's not a violation," said Rozanne Anderson, CEO of the Association of Credit and Collection Professionals. "That doesn't mean you're a bad actor. It underscores why the FDCPA may need to be updated to reflect the needs of consumers and the use of modern technology."
She points out that in many cases, consumers sue over "technical violations."
Thomas Stockton, CEO of a collection agency in Pennsylvania called Credit Mediators Inc., said that the vast majority of collection agencies played by the rules and pointed out that American consumers often don't understand the role that collection agencies played in the American economy. He argued that agencies are retrieving money owed to American businesses, not trying to line their own pockets, and pointed out that collection agencies recouped more than $40 billion in cash each year for clients."All that money is revenue that goes back to our clients," he said, pointing out that his clients in turnpaid taxes on this income, which in turn flowed back to American consumers. "It's an important part of the economy."