Collection Lawsuits Up in May 2011

Recently I discussed the FTC’s annual study on consumer complaints, “FTC Annual Report 2011: FDCPA”.  In this report the debt collection industry received the most complaints.  Not surprisingly, consumers filed the most law suits against collection agencies during the second half of May 2011 than any two week period in 2011.

May – The Busiest Month

From May 16 to May 31, 2011, 660 law suits were filed up from 568 in the first half of May.  The reason for the large increase was due to one suit that named 100 plaintiffs and violated both the FDCPA and Telephone Consumer Protection Act (TCPA).  To put this in perspective, 584 different collection agencies and creditors were sued by consumers during this time frame.

May was the busiest month so far in 2011 with 1,228 consumers filing suits and February was the slowest with 830 FDCPA suits. The total number of consumer protection lawsuits filed year to date as of May 2011 is 5,928; with the majority being filed as FDCPA violations. This information was reported by Michigan based WebRecon LLC.

The good news is that more consumers are aware of their rights when dealing with debt collectors and know when it is appropriate to take legal action.  The word is getting out to them through the media and blogs like this.

Upward trend

The bad news is the number of suits is increasing; collectors are disregarding debtors’ rights and engaging in bad collection practices. Collectors are competing with the share of the debtors’ wallets with other collectors; and other obligations such as mortgages, auto loans, credit card bills, utilities, food, gas and other basics. Unfortunately, this economy has left many unemployed or underemployed resulting in debts that cannot be paid. As a result, both debtors and debt collectors are frustrated and stressed. Collectors are given quotas and to keep their jobs, some feel pressure to do anything to collect including illegal tactics. They know that the debtors have to prioritize their bills with limited funds.

I am not saying that you shouldn’t pay bills you legitimately owe; you should make every effort to do so. Collectors should not harass debtors to get them to pay their bills.  There is a better way to contact a debtor to collect bills. Don’t they say you can attract more flies with honey?

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

 

 

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