Beware Debt Collectors Wrongfully Suing Card Holders
WASHINGTON (9/10/13)--There's a scandal brewing potentially affecting tens of millions of credit card holders, many already being wrongfully sued for money they don't owe (Kiplinger Oct. 2013).
The age-old problem of being hounded by debt collectors is now complicated by multiple "debt buyers." If the bank, credit card company, or other lender gives up trying to collect on a debt, the debt may be purchased by a debt buyer for a fraction of the amount owed. That buyer then could resell it to yet another debt buyer. With each transfer, the consumer's file gets slimmed down to bare-bones detail and may wind up incomplete or inaccurate.
Debt buyers increasingly are going after people for debts they've already paid off. Worse, they're going after the wrong people altogether (ABCNews.com Aug. 12). Some consumers successfully disputed a debt with one debt buyer only to find the debt was resold to another buyer with incomplete paperwork, forcing the consumer to begin the whole process again. And many of those incomplete or faulty documents, including those for debts with small balances, are now finding their way into lawsuits filed by debt collectors.
The debt buyer problem has been on the Consumer Financial Protection Bureau radar for two years, and other groups are attacking the problem simultaneously. The Office of the Comptroller of the Currency is investigating abuses by JPMorgan Chase, and 13 state attorneys general are investigating alleged sloppy practices by Bank of America, Chase, Citigroup and Wells Fargo.
If you get a letter about a debt you don't owe, don't pay it--but don't ignore it either:
Write to the debt collector. Demand proof of the debt and state that you don't believe it's yours. Keep a paper trail--send the letter certified mail.
Review your credit reports. Check whether the debt buyer has reported an erroneous debt to the credit reporting agencies.
Finally, file complaints with the Better Business Bureau, your state attorney general's consumer protection office, and the Consumer Financial Protection Bureau.
Don't ignore lawsuits. If you're sued over a debt you don't owe, file an answer with the court. For low- or no-cost attorney assistance, contact the National Association of Consumer Advocates.
For more information, read "Understand All Your Options for Dealing with Debt" in the Home & Family Finance Resource Center.