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Tougher courts, savvy consumers behind rise in Debt Collection lawsuits

Posted: November 30, 2011

Buffalo, NY -- During October 2011, the number of Fair Debt Collection Practices (FDCP) lawsuits nationwide continued to rise, with New York State listed among the top five states for filings, according to Interactive Data, LLC & FDCPA Case Listing Service, LLC. The states with the highest filings, (comprising 47 percent of all cases) were: California, Florida, New York, Pennsylvania, and New Jersey. With 924 cases filed in October, this year filings are on track to reach 12,000.

“There are several reasons for the increases in these cases,” said Jeffrey Freedman, Senior Partner, Jeffrey Freedman Attorneys at Law. “One is that high unemployment has reached all levels of society and many professionals are experiencing debt problems for the first time. These people are more sophisticated, more well-read, and better understand their rights.”

Attorney John Rossman of Moss & Barnett in Pennsylvania, who represents collectors in FDCPA cases, says he expects growth in the number of cases to continue into next year.

“Each year sets a new record. There has been an increase in consumers defaulting on their debt, and folks can’t file bankruptcy as readily as they once did. It’s too costly -- so they sue the collectors,” Rossman said.

He also said shifts in the law have made it more difficult for collectors to avoid violations and prompted judges to look at cases involving amounts as little as $1,000.

“The only way collection agencies can cover themselves is to record every call and give a disclosure that they are recording the call. That’s not easy for them to do,” Rossman said.

Freedman said collection agencies are not permitted to call before 8 a.m. or after 9 p.m., to call numerous times in one day, or to call a workplace once it is known that personal calls are not permitted at one’s place of employment. Collectors are also restricted from talking to friends, neighbors, or relatives about a debt. And, they must be truthful regarding threats of legal action or garnishment of wages. They are also forbidden from using misleading or threatening language in written or verbal communications.

Consumer rights attorney Peter Barry of Minneapolis says the trend is a sea change from 15 years ago, when he began handling FDCPA cases and only a few dozen were filed each year. He said he also finds many of today’s debtors are shocked at the treatment they receive from collectors.

“Staff at collection agencies need to be knowledgeable of the strict rules regarding collection practices, and stay within the constraints,” Freedman said. “Debtors should never have to put up with harassment. Filing an FDCPA lawsuit can help debtors in two ways -- it stops the harassment, and any settlement that is awarded can be used to help pay down debt.”

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