Credit Wrongly Ruined For Many
COLUMBUS, Ohio (AP) – Debt collectors have ruined the credit reputations of thousands of people over debts they never owed or already paid according to consumer complaints filed with federal and state agencies.
Some debt collectors have forced consumers into paying debts that are erroneous or fraudulent, The Columbus Dispatch reported as part of an ongoing investigation into the nation’s credit-reporting system and the lack of federal regulation over it.
The newspaper looked at more than 22,500 complaints filed with the Federal Trade Commission since January 2009. They were filed by people who said they had a problem with one of the nation’s three largest credit-reporting agencies: Equifax, Experian and TransUnion. About 6 percent said their complaint involved a debt in collection, the newspaper said.
Nearly 10 percent of the complaints – 11,400 since 2009 – made with the Ohio Attorney General’s office over debt collectors involved a collection account reported to a credit bureau.
Government regulators, watchdogs and consumer advocates have called for changes to the federal law that governs debt collection and allows debt collected almost unregulated access to credit reports.
“They don’t abide by any rules,” said Richard Rubin, a consumer-law attorney in New Mexico and an expert on the federal law. “Their job is to squeeze money out of people, and their business model is to go as close to the edge as they can. And they do it with the complicity of the credit bureaus.”
The FTC and the Government Accountability Office want Congress to create more safeguards, including requiring debt collectors to have proof of all debts.
When debt-collection companies take over delinquent debts, the original creditor gives them consumers’ names, contact information and how much they owe.
Sometimes the information is wrong, but debt collectors still report consumers to the credit bureaus, the newspaper said.
Debt collectors maintain that such instances are rare and the fault of the original creditors.
“We are completely reliable on the validity of the information we are provided,” said Mark Schiffman, spokesman for the industry trade group, ACA International, based in Minneapolis. “We’ve advocated that creditors hold onto original information longer.”
The debt-collection industry says less than 0.002 percent of the 4 million consumers it contacts each year file formal complaints, according to the industry. “Our members take a great deal of time talking to consumers. They are serving as counselors,” Schiffman said.
The Consumer Data Industry Association, which represents the three big national credit-reporting agencies, said a 2011 study funded by the industry found that their information is more than 99 percent accurate. “The statements being made about collection items in a credit report don’t ring true,” said Norm Magnuson, the group’s vice president of public affairs.
FTC officials told Congress two years ago that the number of complaints against debt collectors may be understated. Complaints about debt collectors to the agency have increased 73 percent since 2008.