Debt Collectors Find New Ways to Circumvent Consumer Protection Laws

Florida residents are protected from dubious debt collection practices by two laws: The federal Fair Debt Collection Practices Act and F.S. 559.72. cash

The laws prohibit things like:

  • Using or threatening to use violence;
  • Communicating or threatening to communicate with a debtor’s employer before obtaining a final judgment against debtor;
  • Disclosing information to anyone other than debtor or family information that may affect debtor’s reputation;
  • Using abuse, vulgar or obscene language;
  • Claiming or enforcing a debt when it is known the debt isn’t legitimate.

The problem, as highlighted recently by The New York Times, is that most state laws were written many years ago, long before the digital age. At the core, these statutes were written to protect people from becoming completely destitute. But debt collectors are now finding new ways to secure court judgments that allow them to garnish paychecks or seize bank accounts belonging to debtors.

One example was highlighted recently where a number of debt collectors agreed to a $59 million settlement of a class action lawsuit brought by individuals who say their bank accounts and wages were improperly garnished. The lawsuit was first filed six years ago, and asserts debt collectors filed false affidavits in court, claiming debtors had been properly notified of litigation – when in fact, they were not.

When debtors didn’t show up to court – because they didn’t know they were being sued – the debtors were able to secure default judgments against them, granting them access to their paychecks and bank accounts.

This spurred an investigation by the New York State attorney general’s office, which concluded this and other improper tactics within the debt collection industry were effectively allow these agencies to work their way into people’s earnings and savings. Further, a recent investigation by non-profit news agency ProPublica revealed that these cases were being predominantly filed in black neighborhoods.

The Consumer Financial Protection Bureau recently ordered two large debt-buying companies to issue $80 million in refunds, stop collection on nearly $130 million and fix their illegal practices.

Also recently, the National Consumer Law Center advised states to pass regulations that would bar debt collectors from seizing hug chunks of individuals’ paychecks, such that debtors dropped below a certain income level. For example, allow people to keep at least $1,200 a month to live on, for things like rent, utilities, food and transportation.

Unfortunately, as our Miami debt defense attorneys know, many states are woefully behind on this issue. For example, Vermont allows people to keep a cow, two goats and up to three swarms of bees. However, vehicles valued at $2,500 or more are fair game for the banks. According to the latest report from Interest.com, the average price of a new vehicle was $33,000. Used vehicles, meanwhile, cost on average $16,800 in 2014 – which was 5.7 percent higher than in 2013, according to USA Today. Meanwhile, Pennsylvania allows debtors to keep their Bibles, their school books and sewing machines, but only $300 worth of other property. There are many other states in which debtors with a final judgment can seize practically everything.

This kind of practice hurts not only those who have fallen behind, but also encourages people to get into traps where that’s more likely to happen. Creditors may be more likely to engage in predatory lending, because they know that if things go south, they’ll be able to take a debtor for literally everything they are worth.

If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

Additional Resources:

Bad Debt Collectors and Their Prey, Nov. 17, 2015, Editorial Board Opinion, The New York Times

More Blog Entries:

Bruce Jacobs in Daily Business Review: Lenders Must Abide Statute of Limitations, Nov. 1, 2015, Miami Debt Collection Defense Attorney