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Debt Collection & Settlement

Debt Collection

Almost 30 million Americans are currently being pursued by debt collectors, usually for amounts around $1,500. Debt collectors may use legitimate ways to collect debts, but unscrupulous firms use illegal tactics such as threatening consumers, refusing to verify disputed debts, etc. Debt collectors generate more complaints to the Federal Trade Commission than any other industry.

Debt Buying

In many cases, third party collectors buy debt from an original lender for pennies on the dollar, and then try to collect the full amount. The primary tactic of these debt buyers is to sue the consumer, without determining that the consumer actually still owes the debt or that the amount is correct. By obtaining a court judgement against a consumer, the debt buyer can garnish their wages or place a lien on their property.

Debt Settlement

Debt settlement companies promise debt relief to financially-stressed families with claims that they can settle debts for less than the amounts owed. But these programs can be expensive and are often not successful, leaving the consumer in a worse financial position than when they started. Debt settlement companies are trying to legalize their programs in many states where it currently is outlawed.

 

Resolving problems in debt collection, debt buying and debt settlement are critically important today, as consumers try to reduce their debt and rebuild their financial security in the wake of the recent recession. Many state and federal lawmakers and regulators are investigating and addressing these issues, and CRL is working closely with them to ensure consumers are protected adequately.

Resources for Consumers

Watch out for companies that ask for money up front. The FTC found this practice to be harmful and outlawed it. Those who still collect money upfront are violating the law or using loopholes to evade the law.

Before trusting a debt settlement company, be sure to ask for references and check out their background with your state attorney general's office and the Better Business Bureau.  Remember: no one can guarantee to eliminate your debt, so be wary of claims that sound too good to be true.

This video produced by the Federal Trade Commission describes what you can do when collectors go too far:

More resources for consumers

Debt Settlement in the News

The Center for Public Integrity analyzed the debt settlement industry, featuring the story of a teacher who looked to debt settlement for help and ended up in bankruptcy.

Debt Settlement Bill Leaves PA Consumers Vulnerable 
Delaware County News Network (PA) 13 Jun 2014

NC Attorney General Sues Debt-Settlement Firm That Collected More Than $1.1 Million 
Raleigh News & Observer (North Carolina) 16 May 2014

More Debt Settlement News