Consumers are mad as hell about debt collectors and they’re not going to take it anymore. The simple solution: Sue! Some 12,000 lawsuits are expected to be filed under the Fair Debt Collection Practices Act (FDCPA) this year, up from 9,000 in 2009, according to John Ulzheimer, president of consumer education for Credit.com, who spent 14 years at the major credit bureaus. "Last year was 4,000 more than previous year, so the acceleration continues," he says.
The FDCPA prevents debt collectors from harassing consumers by laying down specific laws – for example, making repeated phone calls at unreasonable times; contacting relatives, neighbors or your employers about the debt; or using obscenities, racial insults or slurs, among other prohibitions.
For example, a Texas jury recently awarded $1.5 million in punitive damages and $500,000 for emotional distress to a man who received answering machine messages from a collection agency called Advanced Call Center Technologies. (The content is frankly too disturbing to repeat; click here to read the story from WFAA.com.)
Why the rise in lawsuits? "There’s more bad debt out there to be purchased and collected on, and collectors are very aggressive," says Ulzheimer, who has been an expert witness for both sides in 56 of these lawsuits. "The attorneys who sue under the federal and state protection provisions are taking a lot of these cases on contingency – so now the barrier to entry isn’t financial for the plaintiff."
Some FDCPA violations are entirely egregious, he says, and easy wins for the consumer. In one case, a state trooper had her identity stolen; the thief used it to apply for a cell phone, actually paid the bill for a few months and then stopped paying. "The thief was arrested, so she had a record of this event," Ulzheimer says. "The collection agency still tried to collect this measly $300 cell phone bill — and ended up paying $90,000 to settle." He says most of the cases ended up going to settlement for $3,000 to $5,000.
If you are being harassed by debt collectors, check out a copy of the FDCPA here to see if the caller is violating the law; and click here to find sample letters you can send to collectors to stop them from contacting you. Finally, here's a step-by-step guide to getting out of debt, and a few things you should know about the Credit CARD Act that went into effect in February so you can manage your cards as effectively as possible.