Column: Debt collectors see golden opportunity with all of us stuck at home
In April, the Los Angeles City Council unanimously passed a resolution calling for a moratorium on debt collection until the pandemic subsides. People had enough to worry about, after all.
The measure didn’t go anywhere because of legal concerns. But props to our civic leaders for quickly recognizing what would soon be apparent to many folk with bills to pay.
Consumer advocates say debt collectors have grown increasingly aggressive as stay-at-home orders in California and nationwide have made it easy pickings for them to contact, and occasionally harass, people who owe money.
Christine Hines, legislative director for the National Assn. of Consumer Advocates, said she believes “debt collection will only intensify in the coming months” as millions of Americans struggle to make ends meet amid job losses and pay cuts.
“The pandemic didn’t change how abusive debt collectors are, it just shows that they are capable of doing even more harm to vulnerable consumers than we thought,” she told me.
It’s understandable why debt collectors are stepping up their game. Consumer debt hit a record $14.3 trillion in the first quarter — and that was, for the most part, before the coronavirus kicked into high gear.
Economists say debt almost certainly has grown since then after tens of millions of Americans lost their jobs and numerous others saw their paychecks slashed.
The U.S. Labor Department reported last week that the unemployment rate is now 13.3% — although it said the rate would be as high as 16.3% if a data-collection error is accounted for.
At the moment, reports of pushier debt collection are largely anecdotal. A spokesman for the Federal Trade Commission said an official tally of complaints from consumers won’t be available until the end of the month.
But there’s no disputing that times are tough.
Outstanding financial obligations now must compete with paying the rent or mortgage, buying food and covering medical expenses.
California Gov. Gavin Newsom signed an executive order in April temporarily blocking debt collectors from garnishing any cash from federal stimulus payments made to households amid the pandemic. He also decreed that payments on most student loans could be postponed, without penalty, for 90 days.
“Californians are reeling from the financial impact of COVID-19,” Newsom said. “The last thing they deserve is to see more money withheld as they try to put food on the table and pay their rent or mortgage.”
ACA International, the leading trade group representing debt collectors, says its members are misunderstood.
Mark Neeb, the organization’s chief executive, said in a statement that debt collectors “remain committed to consumers,” and that the industry has responded to the COVID-19 pandemic with “compassion and empathy.”
Kiran Sidhu, policy counsel at the Center for Responsible Lending, couldn’t help but laugh when I shared that with her.
“They’re just trying to protect their bottom line,” she said, adding that she expects the industry to be even more forceful in going after consumers as the pandemic continues.
Case in point: Debt collectors already have made clear they don’t like a proposal from the Consumer Financial Protection Bureau that would require the industry to inform consumers that the statute of limitations on their debt may have passed.
In California, the statute of limitations for most consumer debt is four years. After that amount of time, a collector can still come after you, but they can’t take you to court (or if they do, you can have the case dismissed).
This may be news to many people, not least because debt collectors frequently imply or flat-out declare that if you don’t cough up some dough, you’ll be sued regardless of how long your debt’s been around.
The CFPB rule change also would require collectors to inform people that if they make even a teensy-weensy partial payment, that can restart the statutory clock and make you vulnerable again to a lawsuit.
Neeb said determining if the statute of limitations on a debt has passed “is not always a simple question” and could be a burdensome requirement for the collection industry.
Which is to say, debt collectors would rather not have to do more homework. They’d prefer spending their time interrupting people’s dinner and scaring them about looming legal jeopardy and financial catastrophe.
“If the collection calls get to be too much, you can stop them,” the agency said. “Just send the collector a letter telling them to stop contacting you.”
That won’t get rid of your debt, the FTC noted, “but stopping the calls may give you time to regroup, then start working your way toward financial recovery.”
Some other things to keep in mind:
- A debt collector is prohibited by law from calling you before 8 a.m. or after 9 p.m. unless you authorize them to do so (Don’t).
- The collector must show written proof of the financial obligation if you request it.
- No collector is permitted to verbally harass you, use profane language or misrepresent their status, such as falsely claiming to be a lawyer or government official.
- If you feel you’ve been treated unfairly, contact the state attorney general’s office, the FTC, the CFPB or all of them.
The moratorium on debt collection I mentioned above was introduced by L.A. City Councilwoman Monica Rodriguez. It called on Mayor Eric Garcetti to declare debt collectors “nonessential businesses” during the pandemic and thus temporarily prevent them from operating within city limits.
“Families are already struggling and experiencing economic trauma,” Rodriguez told me. “We don’t need the repo man showing up on doorsteps and taking away assets.”
The mayor’s office responded that although the sentiment behind the proposal is laudable, City Atty. Mike Feuer questioned the legality of the move and whether municipal officials have jurisdiction over out-of-state collection agencies.
Don’t worry, though. You can still count on all that compassion and empathy promised by debt collectors.