Watch for Debt Collection Scams
Debt collection scams can cost consumers financially as well as cost time and aggravation. Debt collection scams and errors occur when the information about a consumer’s debt is recorded incorrectly. Errors regarding debts and debt collections may include minor issues such as the wrong amount recorded in the credit report or major issues such as the wrong person being attributed to the bad debt.
Errors often occur when a bad debt is released or sold from the original creditor to a collection company. These bad debt errors can cost an individual money with unnecessary payments as well as a poor credit history and bad credit score.
Unfortunately, in some egregious cases the debt collection error is due to willful acts made by the collection agency. Collection agencies that end up doing more damage to an individual credit history and credit score by not recording payments properly or displaying a debt as not paid when it should be and other related problems that are caused by willful neglect or intentional deceit.
An example of improper acts conducted by collection agencies was brought to light by a settlement between the FTC and large collection agency. The FTC news release regarding this settlement simply stated “Claimed Debts Were Owed Despite Consumers’ Disputes”
In the press release by the FTC the complaint stated that a nationwide debt collector has agreed to pay a fine of more than $1 million to settle charges that it violated federal law by inaccurately reporting credit information and pressing consumers to pay debts they often did not owe. The FTC charged a company called Credit Bureau Collection Services with these actions and of violating the FTC Act and the Fair Debt Collection Practices Act.
The company was charged with violating the Fair Credit Reporting Act by reporting information to credit reporting agencies that consumers had proved was inaccurate, failing to inform the credit reporting agencies that consumers had disputed the debts, and failing to investigate the accounts after receiving a notice of dispute from a credit reporting agency.
The Federal Trade Commission is a federal government agency authorized to prevent fraudulent, deceptive, and unfair business practices and includes practices in credit reporting and debt collections. Unfortunately, by the time the FTC addresses an issue there may be numerous consumers who have already experienced damaging results by the actions of others. Knowing the laws and rules regarding credit reports, credits cores and debt collections can help save someone from being the victim of unlawful practices and abuses.
Changes to Credit Score Calculations
In 2007 Fair Isaac Corporation, creators of the FICO credit scoring system announced that they would change how their credit score models evaluate credit report data. The new credit score, referred to as FICO 08, was delayed in its implementation until the second half of 2009.
The FICO score model is kept under wraps by the company that created it, but it is always a good idea to obtain a general understanding as to what makes a good or bad credit score. With the knowledge of what drives a credit score, consumers can either engage in good habits to maintain a good credit score or work to improve an existing low credit score.
The changes to the current FICO scores are taking place in a few key consumer sections that include opening new accounts or having prior derogatory information on select accounts and authorized user accounts.
The new version is less damaging for consumers that have had limited credit problems even in severe situations. The score gives less weight to isolated problems as long as the majority of other active credit accounts are in good standing.
The new formula gives less weight to minor derogatory or negative accounts such as small collection accounts and public records in which the original debt was less than $100.
The new credit model also reduces the weight of authorized-user accounts by reducing the potential score impact associated with the abuse of authorized user accounts.
Adding a spouse or child to a credit card as an authorized user has long been a good way to improve that person’s credit score, since the good history already established on the account had generally been imported to the credit report of new authorized user. Some mortgage brokers and credit repair companies began abusing this feature by “renting” authorized-user accounts from individuals that had good credit accounts and selling them to individuals who wanted to boost their scores.
According to company, they have developed technology that reduces any impact on the new credit score from intentional tampering, while allowing the scores of spouses and other genuine authorized users to benefit from their shared credit accounts.
The new credit score model uses the same 300-850scoring range, score reason codes, minimum scoring criteria, and inquiry treatment as previous versions of the score.
Credit bureau scores are often called FICO scores because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company but not all credit scores are FICO scores. FICO scores are provided to lenders by the major credit reporting agencies. The FICO score is the credit risk score used by most lenders in the U.S.
Debt Collection News - Debt Collection Supervisors Settle FTC Charges
The Federal Trade Commission administer a wide variety of consumer protection laws, engages in law enforcement, and develops policy and research tools to prohibit unfair and deceptive acts or practices against consumers including actions that involve credit reporting agencies, credit repair services and debt collection activities.
The FTC produces press releases on action taken against businesses and individuals that fall under the jurisdiction of the FTC.
This is a recent press release on action taken by the FTC regarding unfair and deceptive practices regarding debt collections.
Concluding a case that drew the largest civil penalty ever imposed on a debt collection business, the Federal Trade Commission settled with the two remaining individual defendants who allegedly misled, threatened, and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, in violation of federal law. The settlement order requires each of these senior managers to pay a civil penalty and bars them from future violations.
“The FTC wants to remind debt collectors of their responsibilities and obligations under the law. Abusive collection actions are illegal, and if debt collectors use abusive tactics they could face legal action,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “At the same time, we want consumers to understand their rights if their debts go into collection. Money matters, and the more people know about managing their debt and dealing with debt collectors, the better off they will be.”
According to the FTC’s complaint, filed by the Department of Justice on the FTC’s behalf, the defendants participated in, or controlled, the actions of debt collectors whose unlawful practices included false or deceptive threats of garnishment, arrest, and legal action; improper calls to consumers; frequent, harassing, threatening, and abusive calls; and unfair and unauthorized withdrawals from consumers’ bank accounts. The complaint also alleged that the defendants failed to adequately investigate consumer complaints or discipline collectors, and collectors who were terminated for violating the Fair Debt Collection Practices Act (FDCPA) often were rehired within a few months.
In 2008, Academy Collection Service, Inc. and its owner, Keith Dickstein, paid $2.25 million to settle FTC charges that Academy collectors violated the FTC Act and the FDCPA while collecting debts, and that Dickstein failed to stop the violations. The settlement order announced today, negotiated by DOJ and the FTC, imposed civil penalties of $375,000 and $300,000, respectively, on Albert S. Bastian and Edward Hurt, who oversaw Academy’s Las Vegas collection center. The judgments were suspended upon payment of $7,500 each, based on their ability to pay. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.
The order bars Bastian and Hurt from making false, deceptive, or misleading representations in debt collection efforts, such as that nonpayment will result in garnishment of wages, seizure of property, or lawsuits, or that they or their agents are attorneys. They also are prohibited from withdrawing money from consumers’ bank accounts without their express informed consent, and from depositing or threatening to deposit postdated checks before the date on the check. In addition, the pair are barred from improperly communicating with third parties about a debt; communicating with a consumer at any unusual time or place; and harassing, oppressing, or abusing any person in connection with debt collection.
The Commission vote to authorize DOJ to file the consent decree was 4-0. The consent decree was entered in the U.S. District Court for the District of Nevada. This consent decree is for settlement purposes only and does not constitute an admission by these defendants of a law violation. A consent decree is subject to court approval and has the force of law when signed by a judge.