Debt Collectors Behaving Badly: A Guide to Consumer Rights
Debt Collectors Behaving Badly: A Guide to Consumer Rights
0 Cody Vitello Debt Collectors Behaving Badly: A Guide to Consumer Rights , 23 Loy. Consumer L. Rev. 252 (2010). Available at:
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Article 6
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Cody Vitello *
I. Introduction
the wake of the "Great Recession," banks, creditors, debt
collectors, debt buyers, and their progeny (collectively, "debt
collectors") began vigorously engaging consumer-debtors with
their bluntest instrument - the affidavit. When economic times
are poor and incomes fall (or disappear completely), consumer
debt can easily become insurmountable. Banks and debt
collectors begin what should be a detail-oriented process of
collecting payments, repossessing secured collateral, and seeking
judgments in court. But when someone has literally hundreds,
sometimes thousands, of affidavits to sign each and every day,
then what should be a time-consuming task of verifying debtor
records is instead completed in just a few minutes or less.
Just ask Michael Gazzarato or Cherie Thomas, who were
both hired by their employers to sign affidavits to file in court in
an attempt to get a judgment, lien, and/or paycheck garnishment
against consumer-debtors. Gazzarato, in a 2007 deposition,
complained that he needed a higher quality pen when asked to
sign hundreds of affidavits each day using only an ordinary Bic
pen.2 Similarly, Thomas, in a 2007 deposition, stated that she
signed upwards of 2,000 affidavits each day - approximately one
every thirteen seconds.' These affidavits purport to verify the
* News Editor; J.D. Candidate; May 2011, Loyola University Chicago School
of Law.
1 David Segal, Debt Collectors Face a Hazard: Writer's Cramp, N.Y.
TIMES, Oct. 31, 2010, available at
http://www.nytimes.com/2010/11/01/business/01debt.html.
Id.
Id.
debt's origins, history, and amount. Even more troubling is that
this practice is ubiquitous among today's lenders and debt
collectors.
There is an old Italian proverb which states, "he who is
without debt is without credit;" and in today's global economy,
credit is increasingly vital to everyday transactions. Thus,
consumers must balance their financial (and economic) livelihood
on a credit tightrope without falling into the realm of the
defaulted debtor. Fortunately, there are a few safety nets
available that give consumers redress from unscrupulous and
deceptive practices if they are to stumble or fall; however, as this
Article will show, there is plenty of exposure to cause even the
most financially savvy consumer some cause for concern.
This Article presents an overview of the difficulties
consumer-debtors face from the debt collection industry in the
wake of the Great Recession. Part II surveys several examples of
creditors and debt collectors behaving badly. Part III reviews the
relevant federal law that regulates creditors and debt collectors,
namely the Fair Credit Reporting Act and the Fair Debt
Collection Practices Act. Finally, Part IV provides consumers
with options of redress.
II. Misbehaving Debt Collectors
Before discussing the legal requirements of debt collection
and what consumers may do to mitigate or obviate an already
dire situation, it is useful to survey some of the more pervasively
misleading, and sometimes outright illegal, practices of today's
debt collectors.
In July of 2010, the Federal Trade Commission ("FTC")
published a report entitled, Repairing a Broken System:
Protecting Consumers in Debt Collection Litigation and
Arbitration ("FTC Report").' The FTC Report found several
issues with the current state of the debt collection industry,
including the following:
[debt] collectors failing to properly notify consumers of
suits they have filed, collectors filing suits based on
insufficient evidence of indebtedness, courts frequently
4Id.
' The FTC Report,
http://www.ftc.gov/os/2010/07/debtcollectionreport.pdf.
available
at
granting default judgments against consumers who do
not appear or defend themselves, collectors seeking to
recover on debts beyond the statute of limitations, and
banks freezing funds in bank accounts that are exempt
from garnishment by law.'
The resounding message over the past several years has
been that debt collectors have habitually undermined both their
ethical and legal obligations. For example, one egregious debt
collector told a nine-year-old child, whose mother was the victim
of identity theft, "that they were going to take her mommy away
forever."' The National Consumer Law Center and the FTC
have documented countless similar horror stories on their
respective websites.8
Several other debt collectors and creditors have entered
into consent decrees with the FTC for violating federal law. For
instance, one of the nation's largest debt collectors, Allied
Interstate, was forced to pay $1.75 million in damages for
allegedly "making repeated telephone calls to colle (...truncated)