Debt Collectors Can Seize Your Wages — And Even Your Home!

June 3, 2014  |  

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Imagine losing your home over a $3,500 credit card debt. This happened to 69-year-old Willie Wilson, a retired veteran from Elgin, TX. He was sued by a debt collector over an unpaid $2,500 MasterCard bill. While Wilson admits to being in in arrears on two accounts, he said he never had a MasterCard and was never “served” a summons to appear in court.

In Texas,  a debt collector can legally force the sale of a home if it’s not someone’s primary house. Wilson had inherited a three-bedroom bungalow from his mother. And he lost it to the bill collector.

Scary.

When debtors don’t appear in court a judge can issue a lien on someone’s home, garnish wages, even freeze bank accounts. And sometimes collectors file suit by mistake, such as in Wilson’s case.

“Over the years we’ve heard from thousands of people who’ve found themselves at the end of one of these default judgments,” said Susan Shin, a senior staff attorney at the New Economy Project, a consumer advocacy group. “And most of the people we talk to haven’t received any kind of notice that they were going to be sued.”

According to a study published last year, there were in excess of 200,000 cases filed in New York in 2011 alone.

“Using litigation to get consumers to pay off old debts has proven a lucrative tool for such firms,” reports The Huffington Post. Looking at the four debt-buying firms that publicly disclose their earnings, revenue from legal collections jumped from $582 million to more than $1 billion between 2009 and 2012, found a recent report by the Center for Responsible Lending, a research group that fights predatory lending practices.

Most of the time debtors do not challenge the lawsuits. A Maryland study from 2010 found that fewer than two in 10 borrowers who were served responded to their summons.  And judges don’t have time to thoroughly go through all the claims, say consumer lawyers.

Of course there are consumer protection procedures in place, such as a federal law called the Fair Debt Collection Practices Act that outlaws some types of abusive and deceptive debt collection practices. And more regulation is being drafted by the Consumer Financial Protection Bureau, a government watchdog agency.

Debt collectors say, however, taking debtors to court is necessary to retrieve debt.

“The ability to use the courts is a right that all Americans have,” said Mark Schiffman, spokesman for ACA International, a trade association for the debt collection industry. But, he added, “It’s not the option of first resort because it costs money to litigate these cases.”

Wilson is fighting back. He asked Hull & Associates, the collector that sued him, to investigate. They admitted that there was no MasterCard debt, but in fact they are suing over debt from an account at Best Buy — which Wilson says he did owe. “But, he added, his credit report still lists his debt as delinquent, even though the collection agency said it was paid off years ago. Kleinpeter, Wilson’s attorney, is currently helping him remove the charges from the report,” reports HuffPo.

 

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