Debt Collectors Behaving Badly: A Guide to Consumer Rights

Loyola Consumer Law Review, Dec 1010

By Cody Vitello, Published on 01/01/10

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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: Part of the Consumer Protection Law Commons Recommended Citation - Article 6 Follow this and additional works at: http://lawecommons.luc.edu/lclr 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)


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Cody Vitello. Debt Collectors Behaving Badly: A Guide to Consumer Rights, Loyola Consumer Law Review, 1010, Volume 23, Issue 2,