When it comes to scandalous behavior by debt collectors, I thought I'd heard it all. This is an industry known for its bottom feeders, who routinely bully and intimidate the weakest and most vulnerable among us. Many debt collectors berate and humiliate people into paying off debts that never existed, and pursue people for years, even after the law, common sense, and human decency all demand that they cease and desist.
Now, not all debt collectors are evil, and for those who do it right, it's a difficult and often thankless job. But that's not who we're talking about here. We're talking about those whose limitless creativity in the pursuit of the dollar is only exceeded by their complete lack of morality. We've written about debt collectors in phony sheriff's uniforms, who roust people from their homes, and hustle them into fake courtrooms, complete with "judges" in black robes flanked by law books and sitting behind raised desks. The purpose of this Star Chamber charade is to deceive and frighten their hapless victims into coughing up the cash on the spot.
Stories like these are legion and help to explain why the Federal Trade Commission receives more complaints about debt collectors than any other industry, year after year, with more than 180,000 complaints submitted in 2012 alone. Despite the Fair Debt Collection Practices Act --- amended in 2006 specifically to rein in abusive debt collectors --- this is an industry that is regularly found to operate on the very fringe of legality.
Still, the case of war veteran Michael Collier is a new low and paints a clear picture of a truly ugly nook in the financial services industry where abuse is rampant and often unchecked.
Michael Collier was 100 percent disabled after incurring head and spinal injuries while serving our country in the United States Army. The guy is a hero. Unfortunately, his condition left him unable to keep up the payments on his student loan.
According to a lawsuit filed by Collier, that lapse put another sort of target on his back, courtesy of the debt collection firm Gurstel Chargo. This saga began when the collector allegedly froze more than $6,000 in Collier's savings account. That was illegal, according to a judge's ruling in May 2012, since the funds that were frozen came from veterans' benefits paid to Collier's wife as a result of his injuries. The judge ordered that the freeze be lifted and Collier's benefits returned.
In response, Gurstel Chargo ignored the judge's order and maintained the freeze on Collier's account for months. When Collier called and asked that his money be returned, what he got back instead was a profanity-laced tirade.
"F#!k you! Pay us your money!" the "legal assistant" allegedly yelled at this disabled war veteran, according to a report published by Stars and Stripes. "You can't afford an attorney. You owe us."
Angry yet? See if this lights your fire. The legal assistant then allegedly wished Collier dead. "I hope your wife divorces [you]," this miscreant spat out. "If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our a#!es off. Too bad; you should have died."
Talk about scum.
Debt collectors who relish that feeling of power as they push disabled veterans and others around best watch their backs, because there is a hurricane of redemption headed their way.
In this case, Collier fired back with a lawsuit, which rightfully has garnered plenty of press attention. That's a good start, but Collier's action isn't the only investigation that should happen in this case. Gurstel Chargo is based in the Minneapolis area, and Minnesota Attorney General Lori Swanson has been among the most proactive AGs in the nation in protecting citizens from debt collector abuse and prosecuting firms that violate the law. Collier is suing for civil damages, though the spin doctors at Gurstel Chargo are now scrambling to clean up this PR disaster.
"We are extremely disturbed by the allegations stated in the Complaint, as they are contrary to the policies, practices and values of our firm. We expect that all Gurstel Chargo employees fully comply with all state and federal laws, and we thoroughly train our employees to perform their job in a lawful and respectful manner. Under no circumstances does our firm tolerate the type of conduct alleged in the Complaint," the firm posted on its website.
Nevertheless, a criminal investigation may not be out of the realm of possibility and may be justified here.
Not all debt collectors are so monstrous, but the industry's long history of truly awful behavior has earned the ire not only of consumers, but also that of state attorneys general and at least two federal regulators, the Federal Trade Commission and the Consumer Financial Protection Bureau, which have flagged debt collectors as a persistent threat both to consumers' livelihoods and to the American justice system itself.
Let me pause here for the requisite disclaimer --- because unlike many debt collectors, I do believe in the rule of law. Even though some debt collectors pursue their targets as though they were judge, jury and hangman all rolled into one --- sometimes demanding payment for debts they can't even prove they have the right to collect --- America is still built on the principle that everyone is presumed innocent until found guilty in a court of law. Maybe the legal assistant didn't make such threats, or maybe they weren't as awful as Collier alleges.
Before anyone grabs their torch and pitchfork, let's wait for juries to make their determinations. However, if Mr. Collier's allegations are true, then we must make sure that these debt collectors never again have the power to bully innocent people, whoever they might be.
[Related Article: 11 Ways A Debt Collector May Be Breaking the Law]
Furthermore, the pursuit of justice in this case and so many others like it must not stop in Minnesota. For years, the Federal Trade Commission has been gathering data about misdeeds by debt collectors, and it has prosecuted some of the most egregious players. Many State AGs have litigated and won significant settlements as well. Unfortunately, this represents but a finger in the dike. FTC data indicates that misbehavior by debt collectors is actually getting worse, which tells me that the FTC and state regulators are overwhelmed by the number --- and, in many cases, the sheer audacity --- of debt collector abuses that they know about. What about the tens of thousands of incidents that no one ever hears about due to fear or intimidation?
Consumers obviously need more protection and fortunately, they're about to get it. Under the Dodd-Frank Wall Street reform act, the Consumer Financial Protection Bureau has the power to regulate the "larger participants" across a broad range of financial industries --- and debt collection is one of them. Although the agency is still hammering out its internal rules for how to investigate debt collectors ( while facing formidable political opposition from the right), we know it will both conduct regular examinations of the biggest companies, and respond to major violations of law by taking those responsible to court.
We've already seen what the CFPB can do to clean up unscrupulous practices. Its enforcement actions like this one, this one and that one against various credit card companies over their questionable practices have put some $425 million back into victimized consumers' pockets --- and have put the credit card industry on notice that deception in the sale of financial products will no longer be tolerated.
Now it's time for the consumer bureau to bring the same no-nonsense legal jiu-jitsu to the far more worrisome and nefarious world of debt collection. The Consumer Financial Protection Bureau is probably the best hope that heroes like Michael Collier have for defending themselves against debt collector predation and reforming an industry that routinely crosses into illegality. Frankly, I'm surprised President Obama hasn't made this into a political issue, given Governor Romney's and other Republicans' desire to dismantle the CFPB.
The President should argue that rather than trying to repeal a law passed with resounding majorities in both houses of Congress and destroy an agency supported by 66 percent of Americans, Washington must join with responsible financial companies to create a level playing field for all consumers and corporations, and assure once and for all debt collectors never again abuse innocent citizens or wish death upon our nation's heroes. It's a message that would certainly resonate with me, and many of you I trust, as well.
UPDATE: On October 19, Gurstel Chargo released a statement claiming that the firm was provided a cell phone number by Collier's attorney, and that, "A thorough review of the Gurstel Chargo phone database reveals that no call from Gurstel Chargo to the number provided by plaintiffs' attorney was made at any time from the hearing date through the filing of this lawsuit."
Further, Gurstel Chargo has claimed that the garnishment of funds from Collier's account was in fact legal. "Only upon documentation being provided by the consumer, Mr. Collier, indicating the funds in his account were exempt, did it become proper to extinguish the garnishment. Gurstel Chargo did not and could not have known the funds were exempt in the absence of this documentation."
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.