The creditor to whom you owe money is rarely the one trying to collect the debt from you. The original creditor can hire a collector or sell the entire debt to them. The amount that the debt collector pays depends on their view of the quality of the debt. They can pay as little as pennies on the dollar when buying your debt.
At that point, the debt collector becomes your creditor. They do not have the same customer service considerations as your original creditor. When you borrow from a car lender and you fall behind, they may worry about their reputation and your possible future business. The debt collector has no such concerns.
For the debt collector, the calculus becomes what they must do to collect from you. Depending on how much they paid for your debt, they can make a lot of money if they can find some way to get you to repay. Even if they only get one debtor out of several to make payments, they can still make a lot of money.
You may be shocked to learn how little debt collectors actually pay for your debt. Some studies show that they pay as little as 4 percent of the original value of your debt, meaning they really do pay pennies on the dollar. At that rate, they can make large amounts of money when more than one in every 25 debtors repays in full.
Debt collectors are always looking for sources of debt they believe can become profitable. Even though they pay a fraction of the value of your debt, they will seek the full value from you. They do not reduce what you owe because the debt collector has paid less for it. If you owe $1,000, you have an obligation to pay the debt collector $1,000.
You can see how the debt collector has an incentive to do anything and everything they can to get you to pay what you owe (or even a fraction of it). Some debt collectors will be above board in pursuing the money that you owe. Others do whatever they can to get money from you, regardless of whether it is legal.
Historically, debt collectors have employed many questionable tactics. They have been doing this since practically the beginning of the debt collection industry.
Things got so bad that Congress felt the need to rein in the debt collection industry when it passed the Fair Debt Collection Practices Act in 1977. The main impetus for this law was the unfair and deceptive practices employed by the debt collection industry.
Deception has long been a staple of the debt collection industry. In 1910, one federal court wrote that the existing law was not “for the protection of experts, but for the public - that vast multitude which includes the ignorant, the unthinking and the credulous.” The court did not necessarily mean that as a put down to the public. Instead, the court focused on the fact that the public is not wise to the ways of the debt collection industry and the schemes they may employ.
Debt collectors can always take you to court to get you to pay the money you owe. They can win a judgment against you if there is a valid debt. They may even obtain a garnishment of your income to repay them. However, they are far from assured of collecting any judgment.
You can also declare bankruptcy, and the debt collector must get in line with other creditors - if they can even get anything at all. Along the way, the debt collector may incur legal expenses, including attorney’s and filing fees.
It is always in the debt collector’s interest to get you to pay without taking the case to court. One of their tactics is to do whatever they can to make you fear them. The average person is already uneasy and afraid when debt collectors contact them.
They often do not know their legal rights. They first think they will be in trouble if they fail to repay their debt. They may even think that the debt collector has actual power over them.
Some debt collectors will lie and deceive debtors to exploit this perception. They want the debtor to live in fear. The debt collector aims to get a prompt and full payment to buy more debts to pressure a whole new group of debtors.
Lying has been a standard weapon of debt collectors for centuries. Perhaps the most common lie a debt collector tells you is that they are an attorney or affiliated with an attorney.
One debt collector even went as far as to create a mock courtroom in their office, and they summoned the debtor. They conducted a mock proceeding, where they found the debt collector guilty. Debt collectors often design their communications to look like official legal communications.
Debt collectors can lie in other ways to frighten you. One common tactic is telling you you will be arrested and face criminal charges if you do not pay the debt. They may tell you they will report you to your employer and convince them to terminate your job.
They can even lie about possible consequences for your family members. Even though these lies seem preposterous on their face, the average person fears a debt collector, and they do not know their true capabilities. It is all too easy to believe what collectors say in the moment, creating serious emotional distress and other harm.
A debt collector’s lies often come alongside threats. In one stunning case, a debt collector lied and told someone who owed a funeral debt that they could have their loved one dug up from the ground if they did not satisfy the debt immediately.
Other Deceptions
Debt collectors can lie about other parts of the process and what you may owe them. It is not enough for them to earn an extremely large return when you pay them in full.
They may use other deceptive tactics that can include:
- Overstating the actual amount of money that you owe them
- Trying to collect on a debt that you already paid
- Inventing a fictitious debt that you never owed in the first place
- Reporting false information about you to a credit reporting bureau
- Misrepresenting their identity when they contact you
- Adding various debt collection “fees” to the amount of money that they claim you owe (they should never add these fees to your debt)
Illegal Debt Collection Practices Under Federal Law
It is well-established historically that debt collectors can and do lie in the course of trying to coerce you to pay. The question is whether this is legal, and the firm answer under the law is no.
Section 807 of the FDCPA states:
“A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
The clear language of the FDCPA strictly prohibits outright lying by debt collectors. In fact, the law goes further and prohibits even more than that. The debt collector does not have to tell a straight falsehood to violate the law. They cannot say or do anything that can even reasonably lead to creating a false impression.
Deception can mean that the debt collector does something that closely rides the line of the truth and does nothing to correct any misconceptions. Debt collectors are experts in coming right up to the line of outright lying but not crossing it. However, falsehoods are just one thing that the FDCPA prohibits. There are other ways debt collectors can violate the law and be liable to debtors for their harmful conduct.
The Government Can Take Enforcement Action Against a Debt Collector
Debt collectors can face several consequences for lying and deception under the FDCPA. First, the federal or state government can take enforcement action against them for breaking the law.
On the federal level, the Federal Trade Commission enforces the FDCPA. They can fine a debt collector or even shut them down when they have violated the law. The state attorney general can also investigate the debt collector and take enforcement action. Depending on the debt collector’s conduct, they may even face criminal charges under state law.
Lawsuit Damages in an FDCPA Case
You also have the legal option to file a private lawsuit against the debt collector under the FDCPA. The law allows you to recover several types of damages when you have endured illegal conduct. You do not even need to suffer damages personally. The FDCPA provides for statutory violations of $1,000 if the debt collector has acted illegally.
In addition, you might also receive the following damages if you have suffered harm personally:
- The emotional distress you suffered from the debt collector’s conduct
- Lost income if you missed time from work because of what you endured or if the debt collector’s actions harmed you at your job
- Medical bills if you needed treatment for your condition
- Monetary losses, if they deceived you into paying a debt you did not owe, or the debt collector tacked on bogus fees.
Punitive damages are not a part of an FDCPA claim in federal court. If you filed a case under state debt collector protection laws, you may get punitive damages from a jury for the collector's particularly offensive and harmful conduct.
The FDCPA also allows for a class action lawsuit against the debt collector. Many cases are filed as a class action when a debt collector has used similar tactics with many debtors.
Class action damages under the FDCPA are limited to the lesser of:
- $500,000
- One percent of the debtor’s net worth
However, if you suffered individualized harm, you must file an individual lawsuit. Class action cases only cover situations where a common injury among several victims exists.
Why You Need an FDCPA Attorney
When a debt collector is breaking the law, you may not even know that you have the legal right to take action. Even if you have an idea that you should have a legal claim, you likely have no idea where to begin with the process of seeking relief.
An experienced FDCPA attorney knows both federal and state laws that can protect you from illegal conduct. Then, they can take strong legal action on your behalf.
Your FDCPA attorney can:
- Review the facts of your case and gather evidence that can help you prove your claims
- Help you determine the most effective way to take legal action against the debt collector
- Assist you in the meantime when you are trying to put a stop to the debt collector’s illegal actions
- Quantify the damages that you have suffered, so you can seek the right amount in a lawsuit
- Negotiate a potential settlement with the debt collector that fairly compensates you for what you endured at their hands
- Argue your case in court if you cannot reach a settlement agreement
You do not need to pay anything out of your pocket for an FDCPA attorney. They will work for you on a contingency basis, meaning they only receive payment if you win. The law even allows for the defendant to cover your legal costs if you successfully recover financial compensation. Therefore, there is no risk to you in getting the legal help you need.
The debt collector should not get away with despicable conduct. You can be the one who takes action to stop them, but you want the right legal assistance to do so.
Trying to take legal action against a debt collector alone can only increase your stress levels. Instead, seek a consultation with a consumer protection lawyer who can identify your rights in the face of deception by debt collectors.
Start today by standing up for your interests when debt collection companies cross the line and violate the law.