Debtors Learn Rights the Hard Way
Feb. 9, 2005 -- -- When Grace Lee got a call from a debt collector seeking $3,000 for an 11-year-old credit card bill, she was shocked. She was sure she had paid off the debt more than a decade earlier.
After getting the call from a debt-collection agency called Capital Acquisitions and Management Corp., or CAMCO, in early 2002, Lee explained that it was a mistake.
But CAMCO's collectors didn't want to hear it. They started calling her at home and even at work on an almost-daily basis, even threatening to put a lien on her wages.
Like millions of Americans who receive calls from debt collectors, Lee didn't know what her rights were -- and CAMCO took advantage of that, federal officials say.
'Caught Off Guard'
The problem of aggressive collectors is especially acute starting in January after the busy -- and expensive -- holiday shopping season, federal regulators say.
"People often overextend themselves," said Steven Baker, director of the Federal Trade Commission's Midwest office. "There are really problems in January."
The debt collectors remain busy through the tax season, assuming debtors have more money from holiday bonuses and tax refunds.
Baker says that although the majority of debt collectors do adhere to local and federal regulations, understanding your rights as a debtor can protect you from being taken advantage of.
"It caught me totally off-guard," recalled Lee, a customer service rep who lives in Ronan, a small town in northwestern Montana. "I told them that I had already paid it and that I wasn't going to pay it again."
Lee, 44, says the barrage of phone calls and threats from CAMCO wore her down. "It was a constant hassle," she said.
Frustrated and anxious for the harassment to end, Lee settled with the agency for $1,000.
"I sent them a wire for the money and received a paper that confirmed it was complete," she said. "I figured that was the end of it."
But that wasn't the end of it.
'SCAMCO'
"I couldn't believe it -- they contacted me just a few months ago for the same debt," said Lee. "I was livid."
This time around, Lee decided to do a little research on the Internet to see what she could find out about her rights and about the collectors calling her.
What she found infuriated her.
"I found all this stuff about how CAMCO was a scam," said Lee. "People were calling them 'SCAMCO.' "
When CAMCO first contacted Lee in 2002, the company was already under scrutiny by the FTC. After the federal agency received more than 500 complaints about the company in a three-year period, it sued CAMCO, accusing the company of using obscene language and threats to illegally pursue debts that were beyond the statute of limitations for legal actions. The company settled the case in March 2004, agreeing to pay $300,000 and provide disclosures to consumers, but admitted no wrongdoing.
But Lee says they were still harassing her after that. Armed with the knowledge she gained from various Web sites and furious about being a CAMCO target, Lee says she had enough.
"I told them not to contact me or I'll sue for harassment," said Lee.
Lee says she then filed a complaint with her local Better Business Bureau office, who forwarded it to the FTC. Her complaint was one of more than 2,000 that were filed against CAMCO in the months following the March fine.
The complaints alleged CAMCO representatives were abusive and described phone calls in which the company's collectors made threats like "We will get the money -- we can do whatever we want" and "Don't play smart with me because your life is in my hands."
As a result, in December of last year, a federal judge ordered the company's assets frozen and appointed a receiver to oversee the assets pending trial. The receiver changed the locks at CAMCO's Rockford, Ill., offices and ordered the company's more than 100 employees to collect their belongings and leave.
And those doors will remain closed, according to the FTC's Baker, until they reach a final settlement or there's a court trial.
"They're out of business," said Baker. "I see no prospect of them reopening."
Statute of Limitations
The act of buying and selling debt is a perfectly legal business practice. A credit card company, for example, may sell debts it does not want to collect on itself.
Once the debt is in the hands of a collection agency, it may change hands again. That agency may choose to sell it to yet another collector for varying reasons.
"CAMCO was buying up really, really old debt," said Steven Baker. "So old that it's past the statute of limitations and too old to report on a credit report."
When debts are past the statute of limitations (which vary from state to state), collectors have no legal recourse to collect them. They can inform debtors about a debt and ask them to pay, but they cannot make threats or lie by suggesting that they have ways of forcing them to pay.
With no legal way for CAMCO to compel people to pay, Baker says, the company resorted to lies and abuse that drove people like Lee to pay, even if they were certain they had paid off the debts.
The FTC says the debts were so old that in many cases CAMCO had little or no documentation on the original debtor. As a result they say, CAMCO's collectors would simply find people with the same name who lived in the same area and try to collect from them, whether they were the actual debtor or not.
CAMCO employees told the FTC that between 50 percent and 80 percent of the people who were paying never owed the money. "They were just trying to get these guys off their backs," Baker said.
Fair Debt Collection Practices Act
CAMCO's tactics, Baker says, preyed on people who weren't aware of their rights as debtors under the Fair Debt Collection Practices Act.
"It prohibits things like calling people at strange hours. It prohibits abusive language. It requires that they give you some written verification of the debt," explained Baker. "If you challenge the debt and tell them to quit calling you, they have to stop calling you."
The FDCPA is kind of a debtors' bill of rights. It protects debtors from unscrupulous collectors and gives collectors guidelines as to how they can proceed with seeking payment on a debt.
Allison Robinson learned about the FDCPA after she was contacted by a collection agency looking for payment on a debt she had settled several months earlier with another collector.
She says she told them that she had proof the debt -- $900 she owed to a health club -- had been settled, but got the impression they weren't interested in proof and they were giving her the runaround.
"I would call and get directed to different departments," said Robinson. "I could tell that they just made their money by harassing people."
Robinson says she felt empowered after reading about the FDCPA on the Internet and encourages anyone dealing with an overzealous collector to do the same.
"It helped me draft a letter that they paid attention to," said Robinson. "I felt like they had this big power over me -- they had the power to affect my credit."
Knowing Your Rights
Steven Baker says there are numerous ways debtors can protect themselves from unscrupulous collectors and prevent companies that use deceptive or abusive tactics from claiming more victims.
"We've got a lot of free information at the FTC," he said. "If people have got credit problems we want them to be aware of their rights and of the scams."
In addition to whatever laws your state may have to protect you from unscrupulous debt collectors, here are some of your rights under the FDCPA according to the FTC's Web site:
Debt collectors may contact you only between 8 a.m. and 9 p.m.
Debt collectors may not contact you at work if they know your employer disapproves.
Debt collectors may not harass, oppress or abuse you.
Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
Debt collectors must identify themselves to you on the phone.
Debt collectors must stop contacting you if you ask them to in writing.
Baker says consumers should file a complaint with the FTC or their local Better Business Bureau if they come across a collector who is abusive or deceptive.
"It's important that we get those complaints," Baker said. "We have a nationwide database we share with a lot of other agencies."
In addition, he recommends using the many resources available online at www.ftc.gov and calling the FTC's complaint hotline toll-free at 1-877-FTC-HELP (1-877-382-4357).