Consumer Group Issues Scathing Report on Debt Collection Laws; ACA Responds

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A report released Thursday from the National Consumer Law Center claims that states have failed to protect the assets and income of consumers who have had a judgment entered against them in debt collection cases. The narrowly-focused report is being hyperbolically marketed under the subtitle, “How States Let Debt Collectors Push Families into Poverty.”

The NCLC examined exemption provisions in all 50 states and the District of Columbia, Puerto Rico, and the Virgin Islands. Exemption provisions are laws that protect certain assets and income from seizure and define what percentage of a debtor’s wages can be garnished after a judgment has been won by a creditor or debt collector. Federal laws are in place to offer basic protection to consumers – for example, making Social Security payments exempt from garnishment and protecting 75 percent of any income – but state laws typically go further in defining what is off limits.

The group claimed that none of the jurisdictions met NCLC-defined standards that would allow debtors “to work productively to support themselves and their families” post-judgment.

A main focus of the report is the debt buying industry and its shift to using the court system to collect debts. Using allegations of sewer service and robo-signing of affidavits, both hot issues in the ARM legal industry, the report outright states that many judgments obtained by debt buyers and their legal collection representation are not valid.

The report indicates that many of the debts bought by debt buyers are very old, but fails to mention that statute of limitations laws already prevent ARM companies from suing on those debts. [EDITOR’S NOTE: If you need help with state statute of limitations, check out insideARM’s report “Time is Running Out: Statute of Limitations for Debt Collection.”]

ARM industry trade group ACA International quickly responded to the report.

“The NCLC’s report is all splash but woefully lacking of real substance,” ACA said in a statement. “Instead of focusing on the experience of the typical American consumer, NCLC is focused solely on aiding the financial position of its primary audience—consumer attorneys—and the enactment of its extreme model state legislation.”

ACA noted that the report is cast as “an indictment of the entire consumer debt collection industry when, in reality, the report is far more narrowly focused on current state law that applies in extreme circumstance.”

“The NCLC goes right to the lowest common denominator to incite fear—legal action, garnishment and repossession—which are actions of last resort by creditors after all other attempts to work with a consumer to resolve a rightfully owed debt have failed,” said ACA.

The recommendations the NCLC make in their “Model State Law” include exempting a car so that debtors can get to and from work if their wages are being garnished, exempting a minimum of $1,200 of funds in a bank account, and that any exemption laws are indexed to inflation.

 

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Posted in Collection Law Firms, Collection Laws and Regulations, Debt Buying, Debt Collection, Debt Statute of Limitations, Featured Post .

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Continuing the Discussion

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  • avatar Debt Guy says:

    Yes… getting sued and having your wages garnished is painful and costly. I wonder if all of the ridiculous restrictions (and the resulting FDCPA/TCPA suits) on contacting debtors by phone have anything to do with the more aggressive legal model’s being used? So would the NCLC like us to call more and sue less instead?? Oh, that’s too inconvenient too? I guess the NCLC believes credit = welfare.

  • avatar Farley Fjnork says:

    “…but fails to mention that statute of limitations laws already prevent ARM companies from suing on those debts.”

    NO – you are wrong. Anyone can pretty much sue for anything at any time. Prevailing is yet another topic. The defendant must assert the SOL as an affirmative defense. Kind of hard to do if there is sewer service, and the defendant is totally unaware of the lawsuit.

    There are far too many WELL documented instances of folks being wrongfully sued and having a declaratory judgment/default entered because they didn’t answer…because they didn’t even know they were being sued.

  • avatar Ameripay says:

    No legitimate debt collection agency, debt buyer or attorney will file a suit on an account where they know the SOL has expired. Do mistakes happen? Of course. They happen in open heart surgery too – should we ban that?

  • avatar Sisko says:

    I think sewer service is a really bad thing, and has no place in our legal system. However, I am curious, how exactly do you document sewer service if the consumer never received notice?

  • avatar Debt Guy says:

    If the debtors say they weren’t served it must automatically be true. Same as when they tell you, “the check is in the mail”. Just take their word for it.

  • avatar Farley Fjnork says:

    “No legitimate debt collection agency, debt buyer or attorney will file a suit on an account where they know the SOL has expired. Do mistakes happen? Of course. They happen in open heart surgery too – should we ban that?”

    You really believe this, Ameripay?? Palisades, Asset Acceptance, Allied, PRA, Midland and plenty of others have paid fines to the FTC and Attorney’s General many times for this. It is well documented. Heck – even InsideARM has had articles, and ‘White Papers’ about it. Ask Linda Almonte what her take on this is.

    So long as the ARM industry keeps sticking their heads in the sand over the debt buyer issues (sewer service, robo-signing, hard pulls from CRA’s, etc), you will continue to suffer in the public and political arenas.

  • avatar Commercial Guy says:

    “Hard pulls from CRA’S”? You’re joking, right? Sewer service and robo-signing, I will agree with you on those, but your inclusion of hard pulls among the dastardly actions of the horrible ARM industry seems more than a little over the top.

  • avatar matt kiefer says:

    Can we really blame the consumer when the govt sets the examples of pisspoor fiscal leadership and management? Gone are the days of personal accountability and poor choices…there MUST be someone else to blame poor personal choices.

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