Victims can sue them in state or federal court. If they win, they can collect up to $1,000 from the collector, and possibly court and attorney fees. A class-action lawsuit by a group of consumers can seek up to $500,000 or 1 percent of the collector’s net worth, whichever is lower. Especially egregious violations can warrant civil lawsuits seeking million-dollar fines and company closure.
The FTC also may refer potential criminal violations by debt collectors to federal and state prosecutors. Then it’s up to the prosecutors to determine whether to investigate and bring criminal charges.
Many collectors feel emboldened to push the limits. Doing so can have a personal payoff — in Williams’ agency, top-performing collectors could look forward to $10,000-a-month bonuses.
Williams routinely witnessed fear-prompting tactics. Some debtors were pressed to borrow more. As a collector, “the way you become most successful is getting people to take a second mortgage or create a new type of debt to pay off the one you’re calling about.”
According to officials, common violations of the law include repeated and constant calls to debtors (or any calls before 8 a.m. and after 9 p.m.), false threats to have them arrested or their property seized, or the use of profane or abusive language. Other tactics: pretending to be attorneys or police officers, or threatening to seize wages, property or Social Security payments unless paid.
Public humiliation was an effective tactic, Williams says. Some collectors “would leave messages saying they are ‘investigators’ who will call the debtor’s boss if they didn’t pay. Who wants that?”
Hard-luck stories or claims of mistaken identity fell on deaf ears. “Whether you owe or not, collectors figure you’re gaming them,” says Williams. “They justify their tactics because many debtors run their own scams, pretending to be somebody else or they’re not home.”
The best of times — and the worst
The economic turmoil of recent years has increased the volume for the debt-collecting business.
“Typically, about 3 percent of consumer debt has been turned over for collection, but today it’s running at about 6 percent,” says Mark Schiffman, spokesman for ACA International, the collection industry’s trade association.
Keeping a job in this business, however, is the hard part. “Collectors must meet quotas — bringing in a certain amount of money each month — or risk losing their jobs,” says Michelle Dunn, who owned a debt collection agency for eight years before writing The Guide to Getting Paid and other books for creditors and collectors. They face the paradox that while the amount of debt they’re trying to collect is up, the amount they’re able to collect is down.
“With unemployment and the bad economy, people don’t have the money to pay back,” says Schiffman. “Whether it’s just that or the bad reputation of the industry, most people don’t want to hear from us.”