Interviewer: What other kinds of behaviors are problematic from debt collectors?
Andrew Campbell: Other violations that I see would be most recently where they try to charge money that’s not authorized. What’s happened is a lot of these debt buyers have bought debt from banks. Remember how I was telling you about the charge-off? Well, when you charge off a debt, you’re making a statement to the IRS that the debt is not collectable.
After the Original Creditor Charges Off the Debt, Interest Can No Longer Accrue
If the debt were collectable, you would still keep charging interest. But when you charge off the debt, most banks—unless it’s a business type of debt—will say, don’t charge any interest, because it’s not a collectable debt. Why would we charge interest if we’re not ever going to collect this debt?
So, they stop charging interest. Then they sell it to a debt buyer. The debt buyer sometimes buys these. Let’s say it’s August 16th—that’s the date of the sale. The charge off date was December 18th the year before. They’ll take the interest rate and tack on interest from the date of charge-off until the date they bought the debt. But the actual bill of sale or the purchase agreement never authorizes that.
A very large company called Asset Acceptance is the biggest debt buyer in the nation. They were recently bought out. They had been found liable for that and sued in a class action for adding on interest that was not allowed by law.
Interviewer: What is reasonable for them to add and what is not?
Andrew Campbell: It depends on what the contract says. Often, that will depend on the contract and state law.
Interviewer: I guarantee you there’s abuse there, when the debt you owe the original creditor is two or three times the size, and the debt collector says it’s all their fees of collection.
The FDCPA Only Applies to Consumer Debt, Not Business Debt
Andrew Campbell: They can’t really charge any fees for collection. The exception would be if it’s a business debt. The FDCPA only applies to consumer debt. Consumer debt is debt that is incurred because it’s based upon a personal, family or household expense or purpose.
Tax Debt Is Not Classified as Consumer Debt
Unfortunately, tax debt is not consumer debt. Credit card bill would be consumer debt, because you’re using that to pay for household or family expenses. It’s not a business card, and it’s not in the name of a business. It’s just a person who’s using it. The purchase of a vehicle is normally consumer debt, unless it’s actually purchased by a business for use in that business.
Interviewer: What if you’re personally guaranteeing something? Does that make it a non-business debt?
Andrew Campbell: If you’re personally guaranteeing, no, it really has no effect. It’s the use of the funds. I think of lot of business credit card agreements say this. They say when you use this card you’re authorized to use it for business purposes only. It’s kind of hard for you to back down and say, well, it’s a business credit card, but I used it to buy some groceries.
That becomes an issue of fact, which is basically a question for a jury to decide. Is this a consumer debt or not a consumer debt? Those kinds of cases I wouldn’t typically take because it’s too difficult to prove. It’ll be a real problem to settle the case.
Interviewer: So, debt collectors can’t add on any fees for collection.
Andrew Campbell: Not unless it’s spelled out in the agreement. The exception to that, in Michigan at least, is if it’s a collection law firm and they sue on the debt, they can get attorney fees of seventy-five dollars as part of the fees and costs. They can get the fees and costs of filing the lawsuit, of serving the lawsuit. If they garnish you as allowed by law, they can add the cost of the successful garnishments to the judgment.
This is another violation I see happening a lot when collection law firms. What they’re doing is every time they file a writ of garnishment, it is fifteen dollars.
Some Debt Collectors Tack on Unapproved Fees
They pay the court fifteen dollars for the judge to sign this writ of garnishment which orders someone, a third party, like a bank or an employer, to hold funds that were supposed to be paid by the debtor. They hold them and then send them to the plaintiff’s attorney—the credit card company, the bank, the debt collector.
What they’re doing is they’re filing garnishments, and these garnishments never went through. They’re not successful, but they’re still adding on the fifteen dollar fee onto the judgment. That’s illegal, because that cost, under the court rules in Michigan at least, the cost of the garnishment can be added only if the garnishment was successful. That’s a big violation I see a lot.
Interviewer: What about if they call the person and they speak to their children that are under age. Is that a violation?