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Tough Times

Debt Relief

How to Dig Out of A Hole

As the economy whimpers, debt collectors roar. You can’t stuff that monster back into the closet, but there are ways that you can tame it. And just because you came up short after paying your bills doesn’t mean that you have to run a gauntlet of nasty confrontations. Laws and consumer groups can help you to fend off collectors and negotiate settlements. But be careful: Scammers are everywhere.

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Marissa Ruiz, a single mother who is raising four kids on a social-worker’s salary in Los Angeles, often found herself short at the end of each month and turned to her credit cards for relief. In February 2008, while she struggled under the weight of $13,000 in credit-card debt, Ruiz signed with a debt-settlement service that promised to erase her debts for a fraction of the face amount. Ruiz followed the company’s instructions and stopped making payments on her cards. “I started getting nasty phone calls,” she recalls. “I was threatened with garnishment.”

Film producer Matt Martin maxed out his credit cards to pay for living expenses while he looked for work in Los Angeles. “I started paying it off as soon as I got a steady job back in Chicago,” Martin says. “But it was too late.” His phone began buzzing with calls from the same toll-free number—sometimes more than a dozen an hour. Some callers were polite; others laced loud demands for immediate payment with obscenities. And it continues. “It’s as much a part of my day as brushing my teeth and taking off my shoes before I go to bed,” Martin says.

These tough times mean that debt collectors are calling with a frequency not seen in years. But you should know that there are ways of dealing with debt and debt collectors that can help you get back on your feet—and stop the phone from ringing.

GETTING NASTY ABOUT IT. Whether these calls are more aggressive and unpleasant than before is not clear. Gail Cunningham, of National Foundation for Credit Counseling, an association of nonprofit credit counselors, believes that creditors are, at the least, quicker to make calls now than in the past. “I think the mentality of the creditor is that they had better jump on it sooner rather than later, while the consumer still has some money left,” she says.

Know Your Rights

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Robert Markoff, a Chicago debt-collection attorney and president of National Association of Retail Collection Attorneys, a trade group for lawyers who represent debt collectors, not surprisingly disputes that calls are more aggressive. “People don’t like being called. Therefore, the fact that they’re being called, they sometimes call [that] being aggressive,” he says.

Markoff’s debatable assessment aside, grim tales of harassment abound, and debt collectors prompt more consumer complaints to Federal Trade Commission than any other industry. That number also has been rising steadily. In 2007, the last year for which figures are available, 70,951 consumers called to report alleged violations of the Fair Debt Collection Practices Act (FDCPA)—up by about 1,700 calls from the year before. And collection complaints increased their proportional share of all FTC complaints, rising to 20.8 percent in 2007 from 19.9 percent in 2006.

The most common complaint, which was reported by 27,393 consumers, concerned a misrepresentation of the amount, status or other character of a debt—for instance, a demand for an amount larger than what was owed or an attempt to collect a debt not owed at all. Another 22,146 consumers complained about prohibited harassment, such as repeated calls, calls before 8 a.m. or after 9 p.m., obscene language and threats of violence. Law also bars collectors from threatening lawsuits, criminal action, wage garnishment, property seizure and various other dire consequences, but 6,468 consumers said that occurred nonetheless. Another 4,162 callers said collectors called their place of work, another violation. The biggest percentage increase was for collectors who illegally ignored written requests to cease communications with consumers. This complaint represented 4.9 percent of all complaints, up from 2.9 percent the previous year. (See “Know Your Rights.")

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