By Adam Scott
The other day a young man named Ed (not his real name) called me in a panic because he had just received a telephone call from a King County Sheriff’s deputy who threatened to arrested Ed if he did not call a an 800 number to pay off a delinquent pay-day loan, which Ed had taken out a few years ago. It is not a crime to not pay your debt(s). The police will not arrest you for defaulting on your credit card agreement, your cell phone bill, or your car payment. They simply do not have that authority. Ed did not know this. If he did, he would have known that the person calling him was a fake. Pretending to be a cop, and threatening to put someone in jail unless they give you money, is illegal.
What happened to Ed is an especially egregious example of illegal conduct by bottom-feeding debt collectors. I only hear those types of stories two or three times a year. Other illegal conduct by debt collectors is much more common. For example, the Fair Debt Collection Practices Act prohibits collectors form threatening legal action on debts that are not legally enforceable—e.g., because it is beyond the statute of limitations. So, a collector is free to call a debtor and say “you really ought to pay that credit card bill you defaulted on in 2007.” But, the moment they threaten to sue you, they have broken the law. (In Washington, the statute of limitations for credit card debt is six-years.)
Every year debt collectors buy billions of dollars in delinquent debts. They purchase this debt from the original creditors, or from other debt buyers—who have tried and failed to collect on the accounts—for a few pennies on the dollar. The more beat up the debt is—the more it has been worked by other debt collectors—the less it sells for. The lower a collector is on the debt food-chain, the harder it is to collect on thee accounts, and the more likely they are to resort to very aggressive—or even illegal—tactics to get a debtor to part with their money.
When collectors buy packages of old debt, they usually get a spreadsheet with a list of debtors’ names and addresses, balances on the accounts, and maybe the dates that the accounts were opened and closed. And that is about it. They are buying an Excel spreadsheet and the right to use the information on the spreadsheet to collect as much money as they legally can.
Since the contact information on these spreadsheets is often several years old, collectors use a method called “skip tracing” to track them down. The collectors play detective by calling neighbors, and using various databases, which they hope will lead them to the debtor. If you are debtor, and a collector who has purchased and old debt of yours has been able to track you down in this way, this is when you start receiving the phone calls.
Imagine if the manner in which titles for cars were passed in the same manner as for old debt. There would be no DMV or DOL; cars would not even have VIN numbers. Every time you bought a car from someone, you would just take it on faith that they really owned it. It would be total chaos, but that is the system that exists for consumer debt in America.
Sometimes, especially in cases where a collector has taken the affirmative steps of retaining legal counsel and filing suit against a debtor who will not pay, a collector will produce documents that establish chain of title from the original creditor to itself. If you have not been sued, you still have the right to ask the collector to validate the date. An attorney can be helpful in ensuring collectors abide by debt validation requirements.
In our experience, most people want to pay their debts. An important part of our practice is negotiating debt settlements that are not unduly burdensome on our clients. The irony of aggressive and illegal debt collection tactics is that the worse the behavior the less likely the debt is to be legally enforceable. The lesson: if you are thinking about paying money because someone on the other end of the phone talked you into it, do not. If you want to pay off an old debt, but want assurance that you are not being ripped-off, I recommend speaking with an experienced debt settlement attorney first. If you are sued, or threatened with a lawsuit, you should absolutely contact an attorney who is experienced in defending against creditor actions, and who will hold creditors to their burden of proof.