Regulators in a variety of states are concerned that debt collection agencies are abusing the legal system to go after individuals who are late paying credit cards. The concern is that Florida residents, and people across the nation, are being taken to court for debts based on incorrect information. It is believed that many collections agencies are using bad information, unsupported allegations and even underhanded practices to go after people who owe credit card companies money.
The issue is so bad that there have been cases where people who were not notified that a lawsuit had been brought against them had default judgments rendered against them for failing to show up in court. This is fairly concerning because once a debt collection agency has this judgement, they can then pursue wage garnishment and asset seizure. According to an anonymous source, investigators have been focusing on companies that purchase delinquent credit card accounts and then use the court system to get people to pay these debts.
Some authorities believe that part of the problem is that the information being passed on when these accounts are bought is incorrect. In addition to names and amounts owed being incorrect, some of the debts that have been sold are no longer even owed. Many believe that these debt agencies are not doing their due diligence, and there are now three federal agencies looking into the practices of these companies.
If someone is being sued by a collection agency or dealing with wage garnishment, a bankruptcy could help them put their finances back in order. A lawyer could explain what is involved in filing for bankruptcy and assist them throughout the process.
Source: Los Angeles Times, “Regulators stepping up probes of debt collectors’ practices“, Andrew Tangel and Alejandro Lazo, June 22, 2013