The Consumer Financial Protection Bureau recently ordered two large, debt-buying companies to pay almost $80 million in refunds and penalties. It also demanded these sour apples stop collection on debt reaching some $128 million and amend their illegal practices. Imagine that?
Recently, a group of debt collectors agreed to pay $59 million to settle a class action lawsuit in New York. Many of the suitors had paychecks garnished or bank accounts frozen.
The lawsuit accused companies of filing false affidavits in court claiming that they had properly notified people that they were being sued. The defendants had failed to show up in court, and the collectors applied for a default judgment so they could get access to the individuals’ bank accounts and paychecks. Actual fake documents or very old, noncollectable loans were also often used to the detriment of the people being chased for money.
To protect consumers, the National Consumer Law Center has recommended that states adopt a model law to stop these practices.
That, plus other intricacies, would prevent debt collectors from unduly seizing a person’s paycheck to bring them below a certain income floor, plus allow the debtor to retain a used, average-price car, and retain at least $1,200 in the bank to pay rent, utilities and transportation to work. I think that’s not a bad proposal.
It seems that ineffective protections for the debtor actually encourage predatory lending by those who feel that if a debt goes bad, they can grab almost all of the debtor’s assets. That simply is not right or fair.