As debt mounts, bill collector complaints surge

"There's no lick of any sort of proof," said the company's president, Gregory Wells. "The only thing they have is the word of someone who owes money and is trying to get out of paying."

Rozanne Andersen, general counsel of ACA International, a trade association for debt collectors, chalked up much of the increase in complaints to America's growing debt problem.

According to the Federal Reserve, American consumers now owe around $969 billion in revolving debt — the type of debt that people have on their credit cards — compared with $770 billion in 2003.

Some 4.5 percent of all bank-issued consumer credit cards were delinquent in the second quarter of 2008, versus 2.4 percent in 1990, according to the American Bankers Association.

"There has been a tremendous increase in the volume of bad debts," Andersen said. "That is not an excuse, because we do take these complaints very seriously. But some of these complaints involve consumer misunderstanding of the law, or just frustration."

Regulators say many of the most serious complaints seem to be aimed at a particular type of debt collection agency: companies that specialize in buying old accounts that have defied all previous attempts at collection. There are hundreds of such companies, compared with as few as a dozen a decade ago.

These companies pay pennies on the dollar to acquire portfolios of "zombie debt" from phone companies, banks, health care providers and stores.

"We've seen people being pursued over debts that are 8, 9 or 10 years old," said Minnesota Attorney General Lori Swanson.

Those attempts to collect on older debts that have changed hands several times can be problematic, said the BBB's Polino. Some of the record-keeping on those accounts is so slipshod, he said, that collectors find themselves hounding the wrong people, or chasing accounts that were paid off long ago.

Swanson sued an Illinois debt-collection agency, AFNI Inc., in July, accusing it of failing to verify that old bills were legitimate before going after debtors. AFNI's vice president Jim Hess defended the company's efforts to verify debts and blamed some of the problems on an increase in identity theft.

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Ernestine Williams, a 55-year-old widow in Morristown, N.J., walked into her bank over the summer to make a deposit, only to learn that her account had been frozen at the request of a company that purchased her delinquent Pep Boys repair bill.

The company is demanding $2,135 immediately to unfreeze her account — an amount that includes about $400 in fees and interest on top of her original debt. Williams said she has had financial problems since her husband died and needs more time to pay.

"It's ludicrous," Williams said. "I'm trying to get back on my feet so I can pay my bills. It's embarrassing. I've already pawned all my jewelry. I don't have anything."

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