Who knew debt collections could be such a messy enterprise? The law firm of Frederick J. Hanna & Associates was hit with a $3.1 million charge for illegally filing debt collection lawsuits against consumers and using “deceptive court filings and faulty evidence.”
In another case, JP Morgan Chase was forced to pay over $200million to settle regulators’ claims that the bank wrongfully collected credit card payments from hundreds of thousands of consumers, subjecting them to collections activity for accounts that weren’t theirs and in amounts that weren’t correct or not collectable.
Unfortunately, these aren’t isolated cases. There are many more examples of these bad debt-collection practices. Here are a few of the problems:
- Lost/missing paperwork
- Wrongful collections
- Double collections
- Mandatory arbitration
To compound the situation, there’s very little recourse for current or former debtors who have paid off loans but don’t have a way to prove it.
The good news is that technology can help with these issues. With a self-service portal, debtors can adjust their payments proactively, which helps the original creditor get repaid without feeling like they need to seek out a collections agency.
Another possible improvement is the usage of a centralized database where both consumers and collectors can quickly check the records. With better record keeping and documentation, we could see a massive reduction in fraud, double-dealing, and other collection abuses that plague the system right now.
See Financial Forensic Services improving the landscape for debtors. Global Debt Registry keeps and audit trail to help both consumers and collectors know what’s occurred with a particular debt – and it also allows consumers to receive “extinguishment reports” after they’ve paid their debt.
Currently, both misinformed and unscrupulous collectors are making it harder on honest customers. In instances where debt has already been charged off, sold, or released, consumers are still being intimidated into paying something they don’t really owe. That’s why a national registry and extinguishment report would be so valuable, as consumers would have a reliable way to prove that they paid off their debt in court – and long before the case every goes to court.
Being able to prove that they paid off their debt would be a huge win for consumers!
Another issue the industry faces is how much the state debt collection laws vary. The purpose of documentation for an account is to make sure you collect the right amount from the right person – and that you have authority to to collect that debt. A national registry would help immensely, because right now, it’s hard for a consumer to verify whether a debt collector is telling the truth. It’s also hard for most consumers to remember which company they payed off debt to, or how much the debt was – so when a creditor comes knocking, they’re pretty helpless to defend themselves.
Granted, these technological solutions aren’t cure-alls for the many problems facing the debt collection industry, but they’re definitely a step in the right direction for well-intentioned debt collectors and honest consumers. There are so many chances for errors to occur that it makes sense to have a robust system for equitable record keeping and communication. Hopefully we see the proposed changes come to fruition in the near future.
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