Collection Complaints Increase Fifteen Percent

We've heard a number of economists say the worst of the recession appears to be behind us. But with unemployment in Texas above 8 percent, there are still a lot of people who continue to have trouble paying their bills and that's lead to increases in both complaints and lawsuits in Houston against debt collection agencies who turn to abusive and illegal practices to get people to pay up. David Pitman has more.

The Better Business Bureau of Houston handled more than 1,400 complaints against collection agencies last year.  That's up 15 percent from the year before...and it's more than twice the number of collection agency complaints that came into the local BBB in 2006. 

Monica Russo is a manager of investigations and trade practices at the Bureau.

"We see complaints on collection companies calling people at their office, harassing them.  Acting as if they're with law enforcement or that they're attorneys.  Threatening people with legal action, with criminal action.  We also have collection agencies contacting family members, friends, co-workers."

It's illegal for collection agencies to do any of those things.  But as more people fall behind on their payments, collection agencies are getting more aggressive. And Russo says that results in more complaints.

"In our normal course of business, we normally first bring it up to the company and allow them to address it.  And a lot of cases are resolved, but there are some companies that are just notorious for just ignoring us."

The BBB and other consumer advocates say it can sometimes take hundreds of complaints against a single collection agency before the Texas Attorney General's Office, or the Federal Trade Commission gets involved.  For some debtors, the harassment becomes so intense, they'll seek out a lawyer.

"My name is Dana Karni and I'm a consumer advocate. I'm an attorney in Houston."

Karni says she's getting more calls from people who've been targeted by fly-by-night collection agencies that usually vanish, leaving no one to take responsibility.

"These are companies that are not bonded.  They have no license with the state of Texas.  They are here today, gone tomorrow, which literally means if they violate enough peoples' rights and start getting sued, they fold shop and move elsewhere."

The federal laws that protect consumers from abusive collection practices have been in place since the 1970s.  And Karni says, by and large, the collection industry  plays by the book.

"But those rogue collectors who are trying to collect on 'zombie' debt, that they cannot collect in the court system, what's the next step?  Are you gonna walk away from that debt, or are you gonna get a little bit abusive?  And there will be plenty of companies out there that will abuse consumers rights to make a buck."

The American Collectors Association — a trade group that represents credit and collection agencies — says it's kicking out more members than ever for breaking the association's code of ethics.  But it also says with nearly three dozen state and federal laws to follow, it raises the chances that any collection agency will sometimes fall short in complying with every rule.  The association says it's exploring the possibility of working with regulators and consumer groups to create a nationwide consumer complaint resolution program, aimed at reducing complaints while improving the reputation of the collection industry at the same time.
 

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David Pitman

Local Host, Morning Edition

The one question David hears most often isn't "What is it like to work for an NPR member station?" or "Have you ever met Terry Gross?" (he has)...