By Mc Nelly Torres
Florida Center for Investigative Reporting
Annette Jaramillo, of Apple Valley, Calif., was outraged when a Miami debt collector called her home and told her teen-age daughter and son – in separate calls – that their parents were going to jail.
“I don’t care how much is the debt. It could be million of dollars,” Jaramillo said. “You don’t do that to a child. My daughter was so scared and she was fearful that something would happen to us.”
Bobbie became suspicious when her deceased husband received a bill recently from a debt collection agency based in Illinois offering to settle a debt from a cell phone carrier. Her husband died in 1999. Bobbie, of Tennessee, asked Florida Center for Investigative Reporting not to publish her full name.
Jaramillo and Bobbie are among hundreds of consumers, who have filed complaints with federal and state regulators and posted complaints on consumer-focused sites or consumer boards, alleging that scrupulous collectors have threatened arrest and jail, made harassing phone calls, contacted third parties and told about the debts, called employers at work and also tried to collect a debt not owned by the consumer, all violations of the Fair Debt Collection Practices Act. More alarming, consumers have complained that debt collectors have gained access to their bank accounts and made withdrawals without their consent.
Consumer advocates fear the abuses will grow more widespread in numbers and scope at a time when millions of Americans are struggling to pay their bills.
“There’s no doubt that the debt collection industry is thriving. You can’t get blood from a rock, but these guys are trying,” said Ira Rheingold, executive director and general counsel of the National Association of Consumer Advocates, a consumer advocacy group based in Washington D.C.
Debt collectors’ abusive practices are nothing new but it has become a growing trend across the nation and in Florida where complaints filed by consumers with the Florida Attorney General’s office have jumped from 1,554 in 2007 up to 2,215 in 2009, according to statistics provided by the office.
Florida Attorney General Bill McCollum is currently investigating over a dozen debt collector companies, according to Sandi Copes, a spokesperson for the attorney general’s office.
Just recently, Gov. Charlie Crist signed proposed legislation (SB 2086/HB 7233) into law, which expands the attorney general’s authority to bring civil lawsuits against abusive out-of-state debt collectors and credit repair companies.
McCollum had undertaken an effort to ask state legislators for more authority that would allow his office to have more control over abusive debt collectors. Last November, he sent a letter to the state legislature seeking support to implement new changes.
“We want to work and look at the whole problem instead of taking a piecemeal approach,” said Copes during an interview before the new law was passed.
Lawmakers agreed and the Debt Collector Bill was approved last April with a final 114-0 vote. The change in state legislation would allow the attorney general to pursue a violation of the debt collection act as unfair or deceptive without having to prove separately unfairness or deception. And it grants the attorney general and the Office of Financial Regulation greater authority in punishing abusive debt collectors bringing cases against them.
How the federal law protects consumers
Enacted in 1977, the Fair Debt Collection Practices Act protects the public from abusive, unfair and deceptive practices by debt collectors and the FTC became the primary enforcer of its rules and regulations.
Even though the rules have been the subject of minor changes over the years, the main focus has remained the same: debt collectors are entitled to do their jobs, but not by badgering, pestering, and harassing consumers.
Consumer advocates said the debt collector industry is running amok and nobody, including the federal government, has acted as a watchdog to halt bad practices.
“The problem is that harassment and abusive behavior continues and the penalties for getting caught are not big enough to stop it,” said Lauren Saunders, managing attorney of the National Consumer Law Center, a consumer advocacy group based in Washington, D.C. “Federal regulations had not been adjusted in 30 years and you need an attorney to stop it and a collector getting caught is not enough.”
Debt collectors play a vital role in the U.S. economy and third-party debt collectors returned $40 billion to the economy in 2007, according to statistics provided by ACA International, a trade group which represents 3,500 members, which is about 90 percent of the industry in the U.S. There are approximately 6,500 collection agencies operating in the nation.
Rozanne M. Andersen, chief executive and general counsel of ACA International, contends the industry is not out of control.
“There’s law enforcement within the states such as the attorney generals and the Federal Trade Commission,” Andersen said.
The Minneapolis-based group has a code of ethics and the organization can terminate the membership of those found violating federal rules and the group’s ethics.
The trade group has terminated 21 memberships since 2004. If a member is suspended or expelled, the member’s company name is published in Collector magazine and on the ACA Web site for one month.
ACA allows consumers to file a complaint against a member and consumers can also research and ask questions to experts about credit and debts in English and Spanish.
“I know that many people think that it’s like a fox watching the henhouse and consumers might not trust the process, but we are committed to expelling or suspending those who are not abiding the law,” Andersen said. “We denounce the bad practices that you described [intimidation and harassment].”
Consumer complaints remain a problem
Under FDCPA, debt collectors are not allowed to tell others about consumer debts unless that other person is your spouse, attorney or co-signer. They can call neighbors or relatives in their attempts to contact the consumer, if they don’t know where they currently live. But they can’t say they are calling to collect a debt. And once they found the consumer, those calls should stop.
Even so, the Federal Trade Commission, the federal agency that collects consumer complaints against third-party debt collectors, says the debt collector industry has topped all industries for years in the number of consumer complaints filed each year.
Last year, consumers filed 119,549 complaints against third party and creditor debt collectors claiming violations of the FDCPA, up from 104,642 complaints filed in 2008. Consumer advocates say these numbers don’t reflect the gravity of the problem because most consumers don’t file a complaint.
Some of the alleged abuses included trying to collect a debt that isn’t owed or is beyond the statute of limitations, making harassing phone calls, threatening to make arrests that the debt collector has no authority to make, and collecting a debt discharged in bankruptcy.
Consumers should take notes every time they talk to a collector and start a file to store any legal notices including any hand-written notes or recording conversations with a debt collector or an attorney. If a consumer suspect a debt collector has violated the law, the consumer can file a complaint with the FTC and his/her state’s attorney general office. Another option is to contact a consumer attorney, if they suspect that an attorney has violated the law.
Debt collectors abuses
The robo calls began days after Bobbie’s deceased husband received the bill from AFNI Collection Agency offering to settle the $320.40 debt, apparently owed to a cell phone carrier, for $100.
Bobbie, who always handled the household bills during her 35 years of marriage, said she’s certain her dead husband didn’t owe money to any cell phone carrier.
“When someone is offering you an opportunity to send them money that raises a red flag with me,” Bobbie wrote in an e-mail message because she was too upset to talk about it.
Citing privacy issues, AFNI would not provide much information about Bobbie’s issues after this reporter called to inquire about the widow’s case.
Debra J. Ciskey, spokesperson for AFNI, said the company ceases collection after a consumer dispute a bill. AFNI created a consumer relations desk a year ago to address consumer issues.
“We are required by law to allow consumers to dispute the bill,” Ciskey said, noting that mistakes occur, but consumers need to contact the company. “Consumers need to exercise that right.”
Ciskey promised to look into the case after Bobbie gave permission to provide AFNI with an account’s number. AFNI, Ciskey said, owns the account, a common practice among third-party collection agencies, which buy old debts in bulk and try to collect the debts to make a profit.
Because AFNI owns the accounts, the company has the flexibility to settle the old debt for less money.
Recently, Bobbie’s husband received another letter from AFNI dated April 6. This letter, however, brought unexpected news: AFNI investigated her dispute and decided to close the account.
Bobbie was thrilled and grateful that the matter is resolved, she wrote in an e-mail.
Asked about consumer complaints usually posted on Internet boards naming AFNI and other debt collection agencies, Ciskey said consumers should contact the debt collector and seek resolution.
“Two way conversation or correspondence between the consumer and the collection agency is the best way to solve these problems,” Ciskey said.
In Jaramillo’s case, the debt collector disclosed the debt to her friends, relatives and her husband’s employer. The calls to her relatives caused tension in her family after a debt collector, who identified himself as Paul Martinez working on behalf of Capital Collections, LLC, called her sister in Colorado and threatened to arrest her, she said.
Jaramillo said Martinez identified himself as an attorney on the calls. This reporter conducted a search on the Florida Bar Association Web site, where members are listed, and couldn’t find an attorney practicing law in Miami under Paul Martinez.
“This is my husband’s debt of about two years ago. We were separated at the time. We are talking of a debt of about $200-$250,” said Jaramillo, 51.
Jaramillo called the debt collector and tried to negotiate a monthly payment to pay the debt even though she was unemployed at the time. But the debt collector refused and the conversation turned into a confrontation after the debt collector used profane language on the phone, she said.
And that’s when the calls began. The phone rang at all hours of the day and night.
“I’ve been working on the legal field for more than 20 years,” Jaramillo said. “I knew that everything he was doing was totally illegal.”
Capital Collections, LLC, was contacted and multiple attempts were made, at the time, to interview Paul Martinez twice, but he refused to answer any questions.
In November, Capital Collections LLC was among four debt collectors sued by West Virginia Attorney General Darrell McGraw for allegations to stop the victimization of the state’s consumers by payday lenders and their collection agencies.
FDCPA needs to be revamped
Last October, a report by the U.S. Government Accountability Office, the investigative arm of Congress, called for major changes to the FDCPA law. The report indicated problems with all involved in the debt collection industry including debt collectors themselves, consumers, the FTC and state court systems.
And it emphasized the need to make changes to the law to reflect the evolving debt collection market place and use of technology, since the law was passed before the advent of e-mail, cell phones and fax machines.
The report has invigorated consumer groups, including NACA, as they emphasize the need for a Consumer Financial Protection Agency.
“In today’s complex financial world, consumers need a federal regulator that is looking out for their interests, rather than the interests of the financial industry,” Senator Carl Levin, D-Mich., said in a press release issued after the report was released in October. “Even well-intentioned laws like the Fair Debt Collection Practices Act can erode over time and offer less and less protection to consumers.”
Regardless of federal and state laws, unscrupulous debt collectors continue to use threatening and harassing tactics to intimidate or pressure consumers into paying their debts.
Though consumer advocates contend the FTC collects only complaints and it rarely takes strong action, the agency has successfully sued unscrupulous collection companies in recent years.
In 2008, the FTC settled with Academy Collection Service, Inc., a debt collection agency with offices in Philadelphia, Nevada and Pennsylvania, and its owner for $2.25 million, the largest civil penalty the federal agency has assessed against a debt collection company. Some of the allegations included false threats of wage garnishment, arrest, and legal action; communicated with third parties about consumers’ debts; and called consumers at their workplace.
Enforcement continues in some states
Many state attorneys general have taken drastic actions against unscrupulous debt collectors.
Last year, New York Attorney General Andrew Cuomo went after a Buffalo-based debt collection operation alleging that the company’s employees, which consisted of at least nine debt collection companies across Western New York, had violated state and federal law by routinely posing as law enforcement officials, threatening to arrest consumers and throw them in jail unless they made arrangements to pay the company immediately.
Cuomo has tried to shut down other operations and filed lawsuits against them including the Bening-Smith Group for alleged verbal abuse and in some instances, sexual harassment.
In Florida, a Jacksonville debt collection agency was ordered to pay $1.3 million in restitution and civil penalties in 2008 for violations of Florida and federal collection laws.
Florida attorney general’s office has also been working closely with other state attorney generals to provide complaints about debt collection agencies operating outside Florida, but abusing consumers in the state, Copes said.
While Florida’s new regulation might offer consumers some relief, debt collector abuses continue.
Jaramillo and Bobbie said they would like abuses to stop. Jaramillo filed a complaint with Florida AG’s office. Bobbie wrote a letter to Tennessee governor.
They urged consumers to do the same.
“I think is wrong and someone needs to do something to stop them,” Jaramillo said. “They can’t treat people like that [harassment] to collect a couple of hundred dollars.”