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Buffalo Debt Collectors Violate The Law

As the economy continued to tank, a lot of business people came up with the next way to make a bunch of money, rapidly.
They formed debt collection companies.  The central hub of this activity seems to be in the BuffaloNew York area.  I think the reason has to do with the cheap office space, as the automotive industry has bailed on the Buffalo area, leaving lots of vacancies, and people willing to work.
There are several thousand Debt Collection companies in the US.  This industry is biggest source of complaints to the FTC, year after year. Now that would make sense, right?  People aren’t happy that you are trying to make them pay off their debts, so they get upset and file a complaint about you.  However, the complains are not about the fact that the debt is trying to be collected, they are overwhelmingly about the tactics used to collect the debts.
Some of the unfair tactics that I’ve read about, or have talked to people and they have used on them include:

  • Calling the neighbor of the debtor to “leave a message” for the debtor to call, the debt collector typically claims something like “Well I’ve left messages there, and received no call back, so their phone must not be working, so I’ll leave a message with the neighbor”.  At least that is their cover, they know they are breaking the law in making the call to one’s neighbor, but they do it anyway.
  • Threating to put someone in jail, file a lawsuit, etc.  You can’t go to jail for not paying a debt, unless it’s to the feds or the mob.  Well the mob isn’t going to send you to jail, they just bury you 🙂
  • Failing to notify the debtor of legal action, then filing lawsuits, and receiving default judgement

There are more unfair acts that have gone on, and they are being addressed by the Federal Government, or in some cases, the states themselves.  New York’s Attorney General Andrew Cuomo has filed lawsuits against many of the debt collectors, forcing several out of business for their unfair acts.
Interesting Industry.  Where Is The Money?A lot of these companies go into business, and begin purchasing old debts for as low as 2 cents per $100 in debt.  A very quick way of developing a net wealth, on paper, is to purchase $1,000,000 in debt, for only $20,000.  Now the company looks good on paper, right?  They have a net worth of $1M.  They get the investors to help with the bills at this point, the phone lines, the internet connection, computers, access to credit reports, etc.  
As soon as they acquire some of the debt, they begin to make their phone calls, send out letters.  If a legitimate company can get you to pay even a small portion of the debt, they are made whole again.  Let’s say for example, you owe $2000 on an old credit card.   You get a call from XYZ Debt Collector offering you a chance to “Put this behind you once and for all” for only $700, but you have to act now.    If you pay the $700 and end the bill, you feel like you saved $1300.  Keep in mind, the debt collector probably paid something like $40 for the debt (depending on how old it is),so they made $660 from your debt, that you didn’t pay for.  Now, there are some ramifications that can come up to paying off an old debt, and I’ll cover that in another blog, but for one, if you pay off an old debt, the collection activity becomes recent.  That can potentially hurt your score.
Are you going to write more about this?I find this topic fascinating, so I’m going to write more about this, after a bit more research is done.  There are several things that you shouldn’t do when you are being contacted by these companies.  The first thing that you SHOULD do, however, is know your rights.  More to come on this topic.

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