Complaints About Debt Collectors Rise

If fear is the No. 1 tool used by collection agencies, as consumer lawyers claim, then the rise in complaints against debt collectors shows plenty of debt-related fear being generated in Colorado and the United States.

Of course, views differ on how bad the debt-collection industry really is. On the one hand, consumer lawyers and the Federal Trade Commission (FTC) note hair-raising examples of abuse by collectors who make Freddie Krueger seem like a nice guy.

On the other hand, consumer lawyers are “going to paint a bleak picture,” and while there are a few “bad apples” among the 4,000 collection agencies in the country, they are the exception, said Gobind Sahney, chairman of New York-based Receivables Acquisition and Management Corp.

Sahney thinks the rise in complaints against debt collectors is related to soaring consumer debt rather than any increase in abuse by debt collectors. Whatever the reason, the numbers are indeed climbing.

The Colorado Attorney General’s Office reports that complaints about collection agencies, known as third-party collectors, have risen to 405 for the first six months of this year, up 5 percent from the same period last year. And the 788 complaints in 2003 were up 8 percent from 2002.

Meanwhile, the FTC reports a 19 percent increase in total Colorado debt-collector complaints — including both third-party collectors and creditor collectors — between 2002 and 2003, to 661. National complaints also rose 19 percent, to 47,099.

Recent lawsuits filed in Denver show how severe the abuses can be, and the FTC’s 2004 annual report outlines a host of illegal activities under the Fair Debt Collection Practices Act (FDCPA), such as debt collectors contacting employers and neighbors of the debtor and threatening the debtor with “dire consequences” such as criminal prosecution and jail.

But Rozanne Andersen, general counsel of Minneapolis-based debt-collector trade association ACA International, said she would absolutely disagree with assertions that fear is the primary weapon of debt collectors. Understanding the debtor’s situation, rather than instilling fear, is the No. 1 tool of collectors, she said.

“Fear is something that is very, very outdated,” Andersen said. “We absolutely support ethical practices and denounce any practices that run afoul” of federal or state consumer laws, she said.

She thinks that debt-collector practices have improved compared with 25 years ago, or even five years ago, and she attributes the rise in complaints to the increased number of contacts by debt collectors, who make billions of contacts with debtors per year.

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