Debt collectors could face new regulations

Agency soliciting public complaints.

The calls to Dorothy Smith of Bethlehem started in January.

She was told she owed nearly $8,300 for an unpaid home-improvement loan.

Smith told the caller, Portfolio Recovery Associates of Virginia, that she didn't owe the debt. The money had been borrowed by her deceased ex-husband, but wasn't borrowed during their marriage and she wasn't a co-signer.

The calls continued through April, even after Smith demanded that they stop, according to a lawsuit she filed in federal court in Allentown in June.

Situations like this are prompting regulators to consider new rules to protect consumers from unfair and harassing debt collectors.

Earlier this month, the Consumer Financial Protection Bureau asked people to provide it with information about their debt-collection experiences. The agency said it wants to explore how accurate debt collectors are and the "communication tactics" they use to recover debts, as well as how to ensure consumers know their rights.

Bureau Director Richard Cordray said while debt collectors serve an important role in the credit industry, they must do their job fairly and accurately.

"When debt collectors get it wrong — when they have the wrong person, the wrong amount, or other wrong information — consumers can suffer substantial harm," he said in a statement. "Consumers can be harassed over a debt that is not theirs or that they do not recognize because the information is wrong. Credit reports may be marred by misinformation. In some instances, consumers may end up paying amounts they do not owe."

Smith alleged in her lawsuit that Portfolio Recovery Services had gotten it wrong and continued to harass her despite being told she wasn't responsible for the debt.

Her lawsuit was closed without explanation in August, a month after a judge ordered a settlement conference.

Portfolio Recovery Associates declined to comment. A spokesman would not tell me the disposition of the case, only that it was "old, closed." A spokeswoman for the law firm that handled Smith's case, Kimmel & Silverman of Ambler, said the firm could not comment.

But the firm said it's seen a rise in complaints from senior citizens who say collectors are trying to recover debts that are too old to collect, are inflated amounts, are owed by others or aren't owed at all.

Attorney Craig Kimmel told me he lauds regulators' intentions, yet doubts anything they'll do will have a "tangible" effect on consumers because debt collectors aren't afraid of being sued and don't fear fines.

"It's a cost of doing business," Kimmel said. "You pass it on, you absorb it, you do whatever."

Smith's suit alleged Portfolio Recovery Associates had violated the Fair Debt Collection Practices Act by continuing to call after Smith told them the debt wasn't hers and failed to send her notice of her rights under the law.

The suit said the debt collector implied it would take legal action against Smith despite the fact it had no authority to do so because the debt was in default for more than four years and past the statute of limitations for legal action.

In July, the Consumer Financial Protection Bureau started taking complaints about debt collectors, released form letters to help people correspond with collectors and reminded collectors to follow the law.

More than 5,000 complaints have been filed and the agency added those complaints to its public database a few weeks ago.

"Debt collection is quickly becoming the topic that draws the most complaints of all the consumer financial products and services covered by our consumer-response team," Cordray said.

About 200 complaints were filed by Pennsylvania residents.

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