Report: Debt Collectors Now Using Court System to Unfairly Force Consumers to Pay Up

April 30, 2014
The Center for Responsible Lending has released a new report detailing how debt buyers and collectors are using default judgments to bully consumers into paying money that they often do not even owe.

When sued over alleged debts, CRL says plaintiffs typically fail to make an appearance in court because they were never notified of the litigation, cannot afford legal counsel, or just do not understand the importance of showing up. The collection entity is then awarded a default judgement, giving it the right to freeze the consumer's bank account, garnish wages, report the judgment to the credit agencies, or even have the plaintiff arrested or seize his/her personal property. CRL notes that minorities, older people, and low- and middle-income communities are most affected by the increasingly popular tactic of debt-collection abuse.

As part of its report, the organization is pushing for greater oversight of debt sales. Specifically, it would like to see the sale and collection of time-barred debt prohibited as well as litigation involving such debt. Additionally, CRL recommends holding banks liable for debts they sale, blocking initial collection efforts unless the debt buyer has the documentation needed to verify the debt being pursued, and clarifying and improving recourse options for harmed consumers.

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