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October 20, 2014

“Myths” About Consumer Debt Collection

Posted by Dan Dewoskin in Blog, Debt Collection Defense, Pre-Suit

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A while back, the Association of Credit and Collection Professionals, or ACA International, released an article dispelling myths about consumer debt collection. Read the article here. The article addresses four “Myths” regarding debt collection. Of course, the smart consumer must consider the source of the information as well as the motives at work in this “public service message,” as it were.

“Repayment of consumer debt is the lifeblood of America’s credit-based system and vitally important to the national and state economies,” says ACA International Chief Executive Officer Pat Morris. This statement is utter nonsense. The lenders of much of this consumer debt have long since leveraged their risk in the matter, sold off the debt to scavengers who purchased it for a slight fraction (pennies on the dollar), and/or reaped tremendous tax benefits for their losses.

Much of this consumer debt stems from the lenders taking outrageous risks on those whose credit would not justify any such risk. These individuals may have been sent pre-approved credit cards with low credit limits, such as $300 or so, and then have been subjected to sky-high interest rates, over limit fees, and a host of other predatory charges that more than compensate the lenders for any eventual loss of capital.

To say that the lifeblood of our credit-based system is the repayment of consumer debt in these circumstances is to suggest that the best way to help the economy is to syphon what little remains of those struggling just to get by. The lenders were often insured against the sort of losses that they sustained. The contractual interest rates that they recoup far outweigh their losses on even the riskiest bets they make. An equally ridiculous response might be that if consumers paid all their consumer debt, they would eliminate the jobs of debt collectors and thus cause joblessness and the collapse of the economy.

For all the myths that this article could ever attempt to dispel, it begins with the biggest myth of all: that if these debt scavengers and ruthless collection activities are not permitted to thrive unencumbered the entire economy will collapse. Any unbiased reader need only look to a newspaper to note that credit card companies are not suffering at this moment, but consumers are.

As always, consumers should be vigilant about collection activities, their rights, and their credit. They should never pay or even agree to pay an alleged debt without written confirmation and validation of the debt. They should demand that any offer or agreement be sent in writing. Ideally, they should ensure that any communication with debt collectors be in writing, as debt collectors are notorious for deceptive activities. The article is correct that they are not all the same, but out of an abundance of caution, the best rule is always to get it in writing. Often, merely asking that something be sent in writing will cause a debt collector to become more intimidating, hostile, or arrogant.

Never take a debt collector’s word that his company owns the debt. If a company claims that it purchased your consumer debt, make them provide proof in writing. They can almost never prove these claims and rely heavily on fear, threats, and improper and unlawful tactics to get anything they can out of terrified consumers. If you think that you are being victimized by a debt collector, contact an attorney before agreeing to anything.

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Author: Dan Dewoskin