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Debt collection industry is broken, reform needed

The Federal Trade Commission says hundreds of thousands of U.S. consumers make contact with the agency each year over a variety of consumer protection issues. Consumers contact the federal agency with questions about debt collection practices and to make complaints the agency. Any experienced Cincinnati bankruptcy attorney has heard stories of about how far some creditors will go in an effort to collect on a debt.

Gail Hillebrand with Consumers Union, publisher of Consumer Reports Magazine, says our system of debt collection in this country "is in dire need of reform." Hillebrand recently co-authored a report that is highly critical of the debt collection industry. The FTC had a similar take last year saying our "system for resolving disputes about consumer debt is broken."

Creditor harassment stories usually involve images of countless phone calls at all hours of the day. Creditors using obscene language and unfounded threats of legal action are common themes of creditor harassment.

Hillebrand says, however, that a growing problem is emerging with consumers being sued on debts without proper notice. Many consumers do not respond to a lawsuit. However, Hillebrand says that Consumers Union is finding that more and more people are being sued without receiving the required notice of the pending lawsuit, making it impossible to respond.

When a consumer does not appear in court for a debt collection lawsuit, the collector usually wins by default. The problem is compounded, according to Hillebrand, by the current nature of the collections industry. Hillebrand says that portfolios of debts are often sold and resold for pennies on the dollar. She says debt buyers are employing "robo-signers" in the debt collections industry.

Hillebrand says that more and more people are facing debts that have been satisfied. Another problem with the unregulated debt buying industry is that collectors are seeking to recover from the wrong person in some cases after the debts have been sold and resold. Consumers have an increased difficulty in defending against the debts.

The main difficulty after a judgment is obtained on a debt is that the creditor can file a lien on a home and commence wage garnishment to collect on the judgment. Often consumers are unwary of the impending garnishment, because they do not know that they have been sued in the first place.

The FTC launched a review of the debt buying industry last year. To date, the agency has not released any findings. Any Ohio resident with debt related issues, including wage garnishment, can seek out an experienced debt relief attorney to find answers in how to proceed in any individual situation.

Source: Pittsburgh Post-Gazette, "Debt collection tactics, new and abusive, are in 'dire need of reform'," Patricia Sabatini 27 Mar 2011

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