Is Your Newest Facebook Friend a Sleazeball Debt Collector?
With millions of Americans struggling in the current economic crisis, it should come as no surprise that a growing number of people are falling behind paying their bills. This is no cause for celebration -- unless of course, you happen to make your living as a debt collector, a debt-settlement company or other notoriously sleazy outfits engineered to profit off people's financial misery.
It’s bad enough that while newspapers and car companies die off, the debt business is booming. But recent months have brought a number of reports and lawsuits that exposed some of the latest -- and slimiest -- ways the "financial services" industry is using to cash in on already-struggling Americans.
Is Your Newest Facebook Friend a Debt Collector?
When Michigan resident Paula Newland fell behind in her car payments, she found herself battling some typical -- and not so typical -- tactics used by debt collectors. In addition to repeated, harassing phone calls from three companies -- including 15 calls on one Saturday and claims that phone calls were "concerning a 'family emergency' " -- Newland was told that if she did not pay up, her car would be reported stolen, and she would be arrested. The company also threatened to deploy what they called a "shame automobile" and "camp out all weekend" in front of her house.
And then came a novel approach: As if all this weren’t enough, the fact there were overdue payments for her 2005 Chevy Impala were broadcast on her MySpace account.
Outraged and humiliated, Newland filed a civil suit earlier this year claiming "damage to her business and community reputation, extreme mental distress, aggravation, humiliation and embarrassment."
Newland is hardly alone. Debt collectors are increasingly using social-networking technology to go after people in debt. Ever get "friended" on Facebook by a cute stranger? Think twice before you add them. Some debt collectors have been caught posing as random "friends" on Facebook.
According to a post on Consumerist last month, "Debt collectors are using cute chicks as bait on Facebook to track down and keep track of debtors." It told the story of one employee of a debt-collection agency, who after "friending" some 658 people, declared (rather bizarrely):
haha you guys i tricked you all my name is actually Emily and i work for cbv collections as a skip tracer i bet you guys got calls from them saying you owe money thats all my doing :) you want to call and bitch? i dare you to call me 604-[redacted]!!! I wait to hear from you :)"
Writing about the Consumerist story, blogger Angela Connor who writes at Social MediaToday, noted a trend in the Google searches that lead people to her site. "Here are a few I've seen in the last two weeks," she wrote:
1. "facebook debt collectors" (there are many instances of this one!)
2. "debt collectors are going to start infiltrating social media"
3. "Do bill collector's use LinkedIn?"
"This clearly is a topic on the minds of many," Connor wrote. "I have no idea who is conducting these searches (bill collectors or those trying to avoid them), but I know we will see this more often."
Indeed, another recent lawsuit tells the story of James Ricobene, who sued a Chicago company called Universal Tracing in April after "a senior investigator for the collection agency posted a message on [Ricobene's] daughter's MySpace page asking her to 'contact our office immediately so we can discuss the peaceful recovery' of his 2007 Mercedes GL450.
"The suit identifies JP Morgan Chase Bank as the lender on the vehicle. 'Failure to contact me will result in further action against your father,' the investigator, Chris Flanagan, warned Gina Ricobene."
Because friends and family members saw the MySpace message, James Ricobene says he was "humiliated, embarrassed and suffered substantial emotional distress."
Harassing You for Debt That Belongs to Someone Else
The Fair Debt Collection Practices Act is supposed to prohibit debt collectors from contacting third parties, like family members, when going after people. But this remains one of the oldest tactics in the book. What’s more, consumer rights advocates tell horror stories about the relentless harassment of people who find themselves in debt collectors' crosshairs because of identity theft -- or simply because they share a name with a person with debt.
Human logic would suggest it would be simple to clear up such an obvious mistake. Wrong. Getting off a debt collector's call list is apparently harder than getting off a no-fly list.
One New York lawyer (who, full disclosure, happens to be my sister) represents poor people in debt-collection lawsuits; she tells the story of a client who is blind and partially paralyzed and yet continues to be harassed by a debt collector insisting that he pay money he owes on a gym membership.
"He was like, 'I'm stuck in a wheelchair, and I can't see! Why would I go to the gym?' " says Anamaria Segura, a staff attorney at MFY Legal Services. Neither this -- nor the fact that the man shares a name with his son, whose debt he was possibly being harassed for -- seems to be convincing the debt collector to back off.
"The thing that was hard about helping this client is that he'd not only apparently had his identity stolen; his credit report mistakenly reported debt that belonged to his son, under his son's Social Security number (they have the same name, just Jr. and SR.)"
When the collectors would call, he would explain that there was a mistake -- and they would immediately ask for his Social Security number, to confirm the account. When he refused to provide them with it due to privacy concerns -- after all, this was probably the reason his identity had been stolen in the first place -- the caller would take his reluctance as proof of a challenge or refusal to pay.
"His son was incarcerated, and they barely kept in touch, so he couldn't ask his son about the accounts, so he had to constantly field these phone calls from aggressive debt collectors who demanded payment."
Aside from the gym membership, a debt collector also accused him of owing money on a car rental. This, too, was a mistake, since the client cannot drive.
Yet debt collectors resorted to callous tactics -- including bigotry -- to try to get the money: "One collector said to him once, 'you Hispanics, you're all the same, you don't want to take responsibility.' "
While such harassment is appalling and annoying, it shouldn't actually end up costing you anything, right?
A different New York man described being called multiple times by a Buffalo, N.Y.-based collection agency called Capital Management Services regarding debt on a Chase Bank credit card. The man, Paul Alappat, "told the collector he had never possessed a Chase Bank card and asked them to stop calling him."
When he applied for a home-equity loan two years later, however, the collection showed up on his credit report. His lender told him that if the $394.74 debt were not resolved, the loan couldn't be made.
"Since I was in a hurry to get the loan approved," Alappat said, "I paid the full amount, including the interest."
The Rise of 'Debt-Settlement' Firms
OK, so debt collectors can be total bullies. But what about those seemingly kindler, gentler companies that promise to settle your debt for a fee? According to the International Association of Professional Debt Arbitrators, theirs is a "profession that truly makes a difference."
And making a difference is lucrative, apparently. "The debt-settlement industry is growing very rapidly," boasts the IAPDA Web site. The IAPDA cites historic levels of credit card debt, as well as changes in bankruptcy laws that make it harder for consumers to clear debts, as reasons to "be a part of this exciting industry." In fact, it calls it one of the "top-rated career opportunities of the new millennium."
Last month, however, New York Attorney General Andrew Cuomo announced a nationwide investigation into debt-settlement companies, calling it a "rogue industry" that offers consumers "false hope, charging tremendous fees and leaving them in a worse financial situation."
"The debt-settlement plans offered by these companies are often inherently flawed and, based upon consumer complaints, it appears that many consumers are being misled regarding the nature of the services offered by these companies," according to a press release released last month by the attorney general’s office. "For example, some companies falsely represent that they can reduce consumers’ credit card debt by as much as 75 percent through negotiations with creditors. In addition, the companies often take their fees up front and keep their fees even when they do not provide the promised services."
The cruelty of these plans is that they are based on a payment plan that is a set-up from the start.
"The debt-settlement plans are generally premised on consumers aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their precarious financial situation."
"The real racket," says Anamaria Segura at MFY Legal Services, "is that they'll say, 'Oh you owe $4,000? We'll negotiate with your creditors and settle that for $2,500!' But the fact is, that if the consumer ever is able to compile the $2,500 to pay off the creditors, by the time that happens, the $4,000 balance is now $6,000, because of interests, fees and late charges -- and the debt-settlement companies know that,"
When people come up short, these companies end up telling consumers to find other ways to cough up the cash. This, according to the AG’s office can include telling people to mow lawns, "cut down" on car insurance, "borrowing from their neighbors and church," and perhaps most memorably, "selling their blood plasma."
"Debt collectors are totally different from debt-settlement companies," explains Segura. "I've had some debt-collection lawyers say to me, 'Oh they are terrible, we don't work with them, they really mislead people.' And they're right. But in my experience debt-collection lawyers are no better."
To know your rights when confronting debt collectors go here.