Warren company settles federal suit over ‘zombie’ debts

The Original is Available Here: http://bit.ly/x8QorK

BY DAVID SHEPARDSON

JANUARY 31, 2012

DETROIT NEWS WASHINGTON BUREAU

Washington —The Justice Department said a Michigan-based debt collector has agreed to pay a $2.5 million civil penalty and make sweeping changes designed to protect consumers.

Warren-based Asset Acceptance LLC, one of the largest purchasers of old debts in the United States, was accused by the government of a host of improper activities regarding its collection of old debts.

Asset is alleged to have collected on “zombie” debts without informing consumers that these debts were not legally enforceable. In making a partial payment or promise to pay, consumers might have unwittingly breathed life back into these debts, the government said.

“This is the netherworld of credit — zombie debt — that if companiescan bring just a little bit of it to life, (it) can turn out to be real profit,” said Peter Henning, a law professor at Wayne State University and former Securities and Exchange Commission attorney. “Companies are going to use tactics that go to the edge of the law. And they are taking advantage of people’s ignorance.”

In some states, consumers reset the statute of limitations if they promise to pay the debt or make a partial payment.

“Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations,” said David Vladeck, director of the Federal Trade Commission’s Bureau of Consumer Protection.

The government also said Asset failed to investigate claims made by consumers that they didn’t owe debts.

The settlement will end an investigation launched by the FTC in February 2006.

The company specializes in purchasing old consumer debts from other companies, such as credit card companies, health clubs, and telecommunications and utilities providers, as well as other debt buyers, and attempts to collect them.

Asset Acceptance has purchased tens of millions of consumer accounts for pennies on the dollar, the FTC said. These were typically accounts at least a year delinquent or more.

As of Sept. 30, 2010, Asset held more than 34 million individual accounts with an original value of more than $42 billion. Asset purchased the debt for just 2.54 percent of the face value.

Asset’s parent company — Asset Acceptance Capital Corp. — said the deal resolves the FTC investigation without an admission of wrongdoing by the company.

“This agreement gives consumers even more visibility into how we will work with them and sets new standards for the industry. We are pleased to have this matter behind us,” said Rion Needs, Asset’s president and CEO. “As we have already implemented many of the requirements of the consent decree, we now welcome the opportunity to work with the FTC to make these measures the new standards in debt collection.”

The Justice Department also said Asset systematically failed to conduct a reasonable investigation when a consumer told the company that a debt the company called about was not the consumer’s debt, that the debt had already been paid or that the consumer had been the victim of identity theft.

Asset also allegedly reported negative information about consumers to credit bureaus, even when the company was aware that a consumer had not received a written notice of that fact because the notice was returned as undelivered mail, the Justice Department said. Some consumers learned that Asset had reported them to a credit bureau when applying for a mortgage or auto loan, the FTC said.

Even if they believed the debt was invalid, some consumers would pay Asset to avoid losing out on a new loan they needed to get quickly.

The Justice Department charges that Asset repeatedly called the wrong person when attempting to collect on a debt, even after being told that the company had reached the wrong number.

“Debt collectors can play a legitimate role in our economy, but only if they follow the law,” said Tony West, assistant attorney general for the civil division at the Justice Department. “As this resolution demonstrates, those who do not deal fairly and honestly with consumers will be held accountable.”

The settlement also requires other changes to Asset’s business practices that create safeguards for consumers.

Asset must now conduct a reasonable investigation into the legitimacy of a debt when it becomes aware of a consumer dispute or if the company that sold a debt to Asset provided unreliable information about the original debt.

The proposed consent decree, filed Monday in the U.S. District Court for the Middle District of Florida in Tampa, will settle charges alleging that Asset violated the Federal Trade Commission Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.

A federal judge must still approve the deal.

dshepardson@detnews.com

(202) 662-8735

RECORD-KEEPING IS CRUCIAL IN FIGHTING COLLECTION AGENCIES ON OLD DEBTS

The original article is available here: http://bit.ly/zHjzr5

By Michelle Singletary

February 10, 2012

The Washington Post

What would you do if you received a court summons indicating that you were being sued for thousands of dollars in debt on a credit card you had no recollection of ever applying for or using?

Many people would ignore the court notice. And many of those people would probably end up with a default judgment and be forced to pay the debt, some by having their wages garnisheed or money snatched from their bank accounts.

In 2010, a unit of Asset Acceptance Capital Corp., one of the nation’s largest consumer debt buyers, sued Tim Bond to collect $7,247.09 for charges and accrued interest on a credit card he says he can’t remember applying for.

“I just freaked out,” the Cincinnati resident said.

Asset Acceptance had bought the rights to collect the past-due money in 1999. In a document it sent to Bond, the company said the date of delinquency for the debt was Aug. 9, 1996. That date was key to his case.

Debt collectors have a limited number of years in which they can sue someone to collect. After the time runs out, unpaid debts are considered “time-barred.” Collectors are allowed to contact you about time-barred debts. However, under the federal Fair Debt Collection Practices Act, they cannot sue you for a debt that’s time-barred.

The problem is the statute of limitations varies from state to state. And it can also vary depending on the type of debt.

Last week, Asset Acceptance got a big slap on the wrist from the Federal Trade Commission. The FTC claimed the company used deceptive practices to collect old debts from consumers. The FTC alleged that the company violated both the Fair Debt Collection Practices Act and the Fair Credit Reporting Act by, among other things, failing to disclose to consumers that their debts were too old to be legally enforceable, misrepresenting that people were liable when the company couldn’t substantiate they owned the debt and providing inaccurate information to credit reporting agencies.

Without admitting any guilt, Asset Acceptance agreed to a $2.5 million settlement with the FTC. As part of the settlement, the company also agreed to change how it collects on old debts, including disclosing to consumers when it cannot sue to collect old debts that are past the statute of limitations.

What needs to happen is the establishment of a nationwide, uniform and clear statute of limitations for time-barred debts.

“There can be 50 different (state) laws involved, and different judges can view the law differently,” Asset Acceptance general counsel Edwin “Skip” Herbert said.

With a trial date looming in 2011, Bond researched his rights. He learned what a time-barred debt was and that it was against the law for a collector to sue you or threaten to sue you on a time-barred debt.

Bond believed the debt Asset Acceptance said he owed fell under the six-year statute of limitations in Ohio, because the date of default was listed as 1996. He sent a certified letter, return receipt requested, disputing Asset Acceptance’s claim.

The company repeatedly sent him paperwork asking him to admit that he used the credit card and acknowledge he had signed the credit card application. Bond refused.

Had Bond made even a small payment on the debt, he could have restarted the clock on the debt. Admitting the old debt was his could also have extended the time the debt collector could file a lawsuit to collect the old debt.

Bond filed a complaint with the FTC and the Ohio Attorney General’s Office, arguing that the company was illegally trying to collect on a time-barred debt.

After he filed the complaints, Asset Acceptance dropped the case.

Because the documentation is often so skimpy or nonexistent after debt is sold and resold, don’t freak out if you don’t believe the debt is yours. Find out your rights, and don’t back down.

Contact Michelle Singletary, a personal finance columnist at The Washington Post, at singletarym@washpost.com.

FTC Reaches Settlement with Debt Buyer Regarding Collection of Past-Statute Debt

The Original Article, reproduced below, is available here: http://bit.ly/wDsq2L

The Federal Trade Commission recently reached a $2.5 million settlement agreement with a debt buyer for alleged violations of the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Federal Trade Commission Act.

The debt buyer purchased accounts from credit originators, health clubs, and telecommunications and utilities providers. Most of the purchased accounts were at least one year old, with some accounts surpassing 10 years old. A collector is prohibited from threatening to take legal action or taking legal action once the statute of limitations has expired. Making a partial payment on a debt may re-start or revive the statutory clock, depending on state law. In this case, the debt buyer allegedly made several misrepresentations to consumers when attempting to collect past-statute debt.

The settlement agreement was outlined in a Consent Decree issued by the U.S. Department of Justice. The settlement requires the debt buyer to take a number of steps when responding to consumer disputes and collecting on accounts that are past the statute of limitations. The Decree acknowledges the debt buyer did not admit to any of the allegations of wrongdoing set forth in the complaint and the Decree is not an admission of any such allegations of wrongdoing or violation of law.

Reasonable Investigation
The Consent Decree requires the debt buyer conduct a reasonable investigation when (1) it receives a dispute from a consumer, or (2) the debt buyer has knowledge of or a reason to believe that information contained in the account is incorrect.

Dispute
When a consumer submits a dispute, the debt buyer is required to either close the account and delete it from the consumer’s credit file, or report the account as disputed to the consumer reporting agencies (CRA) and conduct a “reasonable investigation” to ensure the accuracy of the account.

Reasonable Basis for Inaccuracy
If a debt buyer has actual knowledge or has a reason to believe information contained in a consumer’s account is inaccurate, the debt buyer must terminate all collection efforts until it conducts a reasonable investigation. Factors a debt buyer should consider when evaluating the material accuracy of an account include, but are not limited to, whether:

  1. accounts in a particular portfolio have been disputed by consumers for similar reasons at disproportionately high rates;
  2. documents from the original creditor (excluding affidavits) are/are not available;
  3. age, missing data, or other characteristics have resulted in a disproportionately high number of accounts being supplemented by data from third-party sources; or
  4. any other information learned about a particular portfolio’s credit originator and its methods of doing business calls into question the accuracy or completeness of the information.

Investigation
After receiving a dispute or determining information contained in an account may be inaccurate, a reasonable investigation must be conducted. The Decree states a “reasonable investigation” includes evaluating:

  1. the reliability of the information used when collecting or attempting to collect the debt;
  2. the accuracy and completeness of any information from the credit originator;
  3. the accuracy and completeness of any information obtained from third-party sources, including data aggregators, brokers or consumer reporting agencies;
  4. the strength and credibility of any information provided by the consumer;
  5. the nature and frequency of disputes received concerning accounts within the same portfolio;
  6. the methods used to collect information from the consumer; and
  7. any other information that confirms, contradicts, or calls into question the accuracy or completeness of such information.

If the investigation shows inaccuracies, the debt buyer must adequately correct them or close the account, delete it from the consumer’s credit file, and return it to the creditor. The Decree also prohibits the debt buyer from selling the debt to any entity other than the entity from which it acquired the debt, if the buyer cannot substantiate that the consumer owes the debt.

Collecting Debt Outside the Statute of Limitations
The Decree also requires that when the asset buyer knows or should know the statute of limitations has expired it must disclose to the consumer that it will not sue on the debt.

If the applicable reporting period under the FCRA has not expired, the following disclosure must be provided:

The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, we [Agency Name], may [continue to] report it to the credit reporting agencies [as unpaid].”

If the applicable reporting period under the FCRA has expired, the following notice must be provided:

“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.”

Once the debt buyer has made the disclosure, the buyer may not initiate any arbitration or legal action to recover the debt. Additionally, the debt buyer must include notification to any subsequent buyer or assignee of the debt that the buyer is withholding any right to litigate the debt.

Other Requirements
The Decree also requires the asset buyer adhere to the FDCPA and FCRA. The Decree outlines additional notices and disclosures that must be provided by the debt buyer for a period of 5 years. The asset buyer must also provide an annual compliance report to the FTC.

The debt buyer must provide a disclosure on each written communication informing consumers of how to file a cease communication request and notifying consumers where to direct complaints. The disclosure states:

Federal law prohibits certain methods of debt collection, and requires that we treat you fairly. You can stop us from contacting you by writing a letter to us that tells us to stop the contact or that you refuse to pay the debt. Sending such a letter does not make the debt go away if you owe it. Once we receive your letter, we may not contact you again, except to let you know that there won’t be any more contact or that we intend to take a specific action.

If you have a complaint about the way we are collecting this debt, please write to us at [current physical address], email us at [current email address], or call us toll-free at [current phone number] between 9:00 A.M. and 5:00 P.M. Eastern Standard Time, Monday – Friday.

The Federal Trade Commission enforces the Fair Debt Collection Practices Act (FDCPA). If you have a complaint about the way we are collecting your debt, please contact the FTC online at http://www.ftc.gov., by phone at 1-877-FTC-HELP; or by mail at 600 Pennsylvania Ave., N.W., Washington, D.C. 20580.

Additionally, for a period of 5 years, the debt buyer must provide all employees with a specific FDCPA notice that must be signed by the employee. The notice states:

Debt collectors must comply with the federal Fair Debt Collection Practices Act, which limits our activities in trying to collect money from consumers. In particular, Section 804 of the Act says that you may not contact any person other than the consumer for the purpose of acquiring location information about the consumer more than once unless you have reason to believe that the earlier response of the person was incomplete and that such person now has corrected or complete location information.

Also, Section 805 of the Act says that you may not contact a consumer at work if you know or should know it is inconvenient for the consumer, and that you may not communicate with any person other than the consumer in connection with the collection of  a debt, for any purpose other than to obtain location information about the consumer.

In addition, Section 806 of that Act states that you may not engage in any conduct the natural consequences of which is to harass, oppress or abuse any person in connection with the collection of a debt, including, but not limited to, using language the natural consequence of which is to abuse the hearer or reader.

Furthermore, Section 807 of that Act prohibits the use of any false, deceptive or misleading representation or means in connection with the collection of any debt, including, but not limited to, communicating or threatening to communicate to a consumer reporting agency information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.

Individual debt collectors may be financially liable for their violations of the Act.

The settlement agreement reinforces the FTC’s continuing efforts to protect consumers adversely affected by the economy. FTC officials commented the settlement provides a model that all debt buyers and debt collectors should follow.

Debt buyers should be aware of the increased scrutiny the FTC has placed on the industry and ensure continued compliance with the FDCPA, FCRA and state law when collecting on debts in which the applicable statute of limitations has expired and when responding to consumer disputes.

© ACA International

Printed: 2/10/2012

Knowing Rights is the First Step Toward Using Rights

Welcome to StormDebtLaw, a website dedicated to providing information about the more frequent debt-related issues people encounter. 

The unexpected turns in life sometimes place us in what feel like rock-and-a-hard-place situations. An accident at work may lead to substantial medical bills. Layoffs may lead to a period of unemployment. The stories are many, but they frequently end the same: financial demands and the inability to satisfy those demands lead to the harassment of aggressive collection agencies.

The tactics of such agencies are, however, regulated by federal laws that give substantial protections to Americans.  The Fair Debt Collection Practices Act (FDCPA) punishes debt collectors engaged in abusive or coercive collection strategies. If a debt collector violates the FDCPA, the consumer is frequently entitled to financial compensation from the debt collection company.

This website is your resource for understanding these rights. It is designed to:

1. Give you information to protect yourself from abusive debt collection practices.

2. Guide you toward the best recourse to present or past abuse from debt collectors. 

Nutshelled: Debt Collectors Are Prohibited From

  • Threatening legal actions they cannot take. Examples: liens, or arrest for not paying a bill.
  • Calling your family, friends, neighbors or employers to collect a debt.
  • Using abusive language
  • Deceit or otherwise harassing you in any way
  • Denying you access to proo

Important Steps You Can Take To Help Your Case

  1. Save all mailings from collection agencies.
  2. Save all phone messages and voice mails.
  3. Keep a call log of your conversations with debt collectors.
  4. Request your credit report annually.
  5. Call a consumer rights attorney to help you recover your damages.