Interviewer: What are some of the abuses that you see now, many years later that debt collectors still perpetrate that requires this law to stay in effect?
Andrew Campbell: I really divide things up into two kinds of categories. Obviously, a debt collector is a term of art. It’s a specific phrase that’s defined. It means a collection agency. It means a debt buyer. It does not mean the original creditor, necessarily. The original creditor is the one who gave you the credit. They’re typically just a creditor. They’re not what are deemed a debt collector. Every creditor is just like every person. They want to reduce their income taxes. So, every creditor follows specific rules from the FDIC and the IRS in order to get tax deductions.
Why Do Creditors Charge Off Debts?
The creditors will realize, we’re not getting paid from Joe Doe, and it’s been six months. A hundred and eighty days have passed. We’re going to charge this account off. A lot of clients call me up and they say, the account was charged off. I don’t owe the debt.
Then I have to explain to them, well, charge off is an accounting term. Every corporation’s books have two sides. On one side, they have their liabilities; on the other side, they have their assets. That’s how things are measured in corporations. You have your assets and liabilities.
When an Asset Is Moved from an Asset to a Liability, the Corporation Receives a Tax Write-Off
If you want to take a tax write-off on that debt that you’re not being paid, you have to move that from the asset side of the balance sheet over to the liability side. You do that by charging off the account. That’s simply saying, we think this debt’s not collectable, so we’re just going to charge this off, we’re going to sell it to a debt buyer or we’re going to give it to a collection agency. We’re taking a loss right now.
After Charging Off the Debt, the Corporation either Sells It or Assigns It to a Collections Agency
That’s a way to save money on their taxes. But to do that they have to follow specific rules. They’ll either sell it to a debt buyer or give it to a collection agency, typically.
The collection agency will work that file for six months. The first question I ask when anyone calls me about the FDCPA or they have a debt collector harassing them is what kind of debt is this? Is it a payday loan, or is it a non-payday loan debt?
Payday Loans became Popular as an Alternative to Credit Card Usage
Unfortunately, what’s happened in the industry in the last three or four years, we had the financial crisis in 2008. That changed everything, because what happened is credit card companies tightened lending. The people with sub-prime credit could not get credit card type debt, so they went to payday loans.
The payday loan companies for some reason, I don’t know why, they sell their debt to—or assign the debt to—these collection agencies that have a reputation for fraudulent practices. They’re usually located in New York State, usually right in Buffalo. Buffalo has some laws that encourage debt collection companies to locate there. The minute I find out it’s a Buffalo collection agency or a payday loan type of debt, then I really have to kind of look at it carefully, because it’s more difficult to fight these companies.
Payday Loans are Usually Serviced by Debt Collectors That Relocate Frequently to Avoid Legal Action Arising from Unfair Debt Collection Practices
Interviewer: Why is it tougher to fight those debt collectors?
Andrew Campbell: Because they hide themselves. Their location is hard to find. If you can’t find their location, you can’t serve them, and if you can’t serve them, you can’t get a judgment. Even if you can serve them, they have to be collectable, right? Am I able to collect money from them if I actually get a judgment? Some of them are just so shady they’ll just move to another area and start again.
In Truth, the Only Action Available to a Collection Agency Is to Report the Debt to the Credit Bureaus; Any Other Threats Are a Misrepresentation and an Unfair Practice
Interviewer: But don’t these companies only have the power of a threat to report the consumer to the credit bureaus, is that right?
Andrew Campbell: You’re right. You’re absolutely right, but the average person doesn’t know that. People answer their phone, and again, let’s just assume it’s a payday loan debt collector. The consumer doesn’t know the law. The debt collector will threaten people with arrest, which they can’t do. They’ll threaten them with garnishment before they even have filed a lawsuit to actually get the power to garnish. They’ll represent that they can garnish wages. They’ll threaten them. They’re just rude and very disrespectful. That is typical behavior from a payday loan collector.
People Also Are Subject to Collection Activity for Older Credit Card Debts and Unpaid Student Loans
Interviewer: What other kinds of debts do you hear clients’ complaints of?
Andrew Campbell: Well, normally if it is not a payday loan type of debt, it’s usually from a credit card debt—an old credit card debt. Sometimes it’s from a student loan. Sometimes it’s from a purchase of a vehicle. When I’m dealing with those from actual real collection agencies, then I’m dealing with somebody who I could actually make a claim and collect for.
That’s the first kind of hurdle. It’s more of a practical one, rather than a legal one. Then, typically, I’m just looking for any violations. Obviously, there’s a whole list of violations that consumers are subject to.
Common Collection Agency Violations
Interviewer: What are the violations?
A Consumer Cannot Be Contacted Prior to 8am or after 9pm
Andrew Campbell: A collector cannot call you before 8am or after 9pm at night. Most of the time this is never a problem, because debt collection agencies often have their phone systems tied to operating during those times only. In other words, they can’t even pick up a phone and make a call out if it’s before 8am. Those are the reputable collection agencies. You just don’t see a lot of that.
Most people receive what’s called a 1692g letter. Whenever you owe a debt, usually they’ll call you a few times. Within five days of the first contact, they have to send you a letter called as 1692g letter. What that letter says is, we own this debt, and you have to pay us. You have thirty days to write us and to ask us questions about this debt, but you got to pay us.
The 1692g letter is typically not a violation. The reason is the language that they have to use in that letter is spelled out in the statute.
Interviewer: I’ve seen those letters. What happens if you don’t know what the debt is for? How do you go about finding out?
If You Are Notified by a Collection Agency but Do Not Recognize the Debt, Write to the Agency to Have Them Validate the Debt
Andrew Campbell: You can call them up and say, I don’t know what this debt is. Who is this from? Ask them some questions. But the best way is to ask for validation in writing. You want them to validate and verify the debt. So you write a letter to them. If you’re going to do that, write a letter, send it certified mail, return receipt, so that you have proof that you actually sent the letter and they received it. Also, make sure you send it to the correspondence address on the letter, usually the address at the top of the letter, rather than the payment address.
If you see a P.O. Box, it’s probably a payment address. It may or may not be, but the payment address at the bottom usually differs from the office address at the top. I would send it to the office address, certified mail, return receipt, and just write, I received this letter, and I don’t know who the creditor is that you’re trying to collect and what debt and when was it incurred.
Their only duty, really, is to send you a summary of the debt, which would be the name of the original creditor, and the amount you owe. They don’t have to send you all the billing statements. They don’t have to send you, really, anything else. That’s pretty much it.
Interviewer: You can’t demand that?
Andrew Campbell: You can demand that they validate the debt, and validation is simply a summary of the name of the original creditor and the amount you owe.
But that amount might be from a credit card you don’t even remember having. It might be a credit card that had a three hundred dollar limit and now because you didn’t pay it for six years and it’s now two thousand dollars or something. That’s one tool you can use.