New breed of collectors has debtors seeing red

"In every sector, there are bad apples, but 95 percent of all debt buyers are good, nice business people," said Warren Dedrick, chairman of Marlin Integrated Capital Holding Corp., a large buyer of medical and utility debt. "I believe hardly any debt buyers break the law, but on the other hand, if you're talking to a consumer once a week for six weeks, it's going to do nothing but alienate the consumer base."

Dedrick has expressed concern that as the industry becomes more competitive, tough tactics would draw the attention of law-enforcement officials.

"I think we'll see more shutdowns from the FTC because debt buyers who purchase paper at higher prices will have to push consumers harder and harder to get their desired return on investment," Dedrick told Kaulkin Ginsberg, an advisory firm for the accounts-receivable industry, according to a recent report.

Harassment by some collectors "is definitely getting worse," said Sonya Smith-Valentine, a Greenbelt lawyer who has represented Maryland and District consumers in lawsuits against debt collectors for three years.

Particularly troubling, Smith-Valentine said, are the growing number of cases in which collectors persuade a consumer to pay just a little — and then use the bank information from that payment to improperly withdraw more funds from the consumer's account.

That was the experience of Sheilah R. Henderson of Lanham, as detailed in a lawsuit filed in the U.S. District Court for Maryland. According to the suit, a collector threatened to sue her for a bill for a home-security system that had been incurred by Henderson's deceased mother. Although Henderson was not responsible for the debt, she agreed to have money automatically debited from her bank account on the 15th of every month. According to the complaint, the next thing she knew, the collector tried to withdraw money five times in three weeks, with Henderson incurring a returned check charge each time.

Calls at work
Henderson ordered a stop to the wire transfers, but then the collector started calling her at work, threatening to garnish her wages if she didn't pay. Henderson asked the collector to stop calling her at work, her right under federal law, but the collector told her he'd continue to call her there "until she lost her job," the lawsuit said. The lawsuit was settled under a confidentiality agreement.

The consumer debt-buying industry began in earnest in the early 1990s, when the federal government began selling off assets from failed savings and loans. Before then, credit card firms and other creditors rarely sold unpaid debt, instead hiring third-party firms or lawyers to collect the bills — usually on a commission basis.

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