Don't Ignore Debt Collectors -- But Don't Pay Them, Either (If You Don't Owe)
Aug. 12, 2013 — -- Last week, ABC's "The Lookout" aired my follow-up report about Diana Mey, the woman we first profiled in 2012 who won a $10 million judgment against a debt collection company. Like the original story, it garnered thousands of page views, zooming to the top of ABC's most viewed list.
I mention this not to pat myself on the back, but because I think the viral nature of the story is a story itself. Clearly, people out there are struggling with debt collectors. In fact, debt collectors remain the No. 1 subject of consumer complaints to the Federal Trade Commission. And not just any collectors. The subset of debt collectors that really riles people up are called "debt buyers."
Once a bank, credit card company or other lender gives up trying to collect a debt itself, it often sells the account to a debt buyer for a tiny fraction of the amount owed. That debt buyer either tries to collect it or re-sells it to yet another debt buyer -- or both. Consequently, consumers are often hounded by the original creditor, that creditor's hired-gun collectors, the first debt buyer and a string of subsequent ones.
And when a debt buyer purchases a debt, what exactly do they get? Not a fat file full of detailed information about the account. Not at all. They get an electronic file with the bare-bones details: maybe name, account number, amount, date. Using that vague information, they try to collect.
Because their information is incomplete, debt buyers often go after people for debts they've already paid. Or they go after the wrong people altogether. God forbid your name is "John Smith" and you live in a densely populated zip code! Consumer complaints about mistaken debtor identity have skyrocketed, according to the FTC.
Worse yet, some citizens have disputed a debt with one company and gotten the matter resolved, only to find that the company sold their debt yet again and didn't pass along the paperwork showing it wasn't their debt. So the entire process begins again.
That's why Consumers Union, the policy arm of Consumer Reports, says reforms are needed to protect consumers:
So what should you do if you're contacted about a debt you don't owe? Pay it? NO. Ignore it? No again. Here's a better battle plan:
