According to a 2014 study from the Urban Institute, 35 percent of U.S. adults that have a credit file also have debt in collections, with an average amount of $5,178.
The U.S. Consumer Financial Protection Bureau (CFPB) reports that 169,000 complaints about consumer financial practices were filed in 2015. By far the biggest source of complaints were made against debt collection agencies.
Debt collection is a $13 billion dollar business, according to the Alliance for a Just Society (AJS). “The debt buying industry, in particular, has grown rapidly since its inception during the Savings and Loan crisis of the late 1980s and early 1990s. Today, two of the three largest debt collectors are primarily debt buyers, and these companies have experienced explosive growth.”
Unfortunately, people are frequently contacted about debt that isn’t really theirs. If you are contacted by a debt collection agency and suspect that the debt is not yours, there are some steps you can take to protect yourself.
The likelihood that you are being contacted about someone else’s debt is high. The AJS combed through two years of CFPB data. Its findings? “The most common complaint was that respondents were being asked to pay a debt that they do not think they owe. 42 percent of the complaints fell into this category, representing mostly debts that were already paid or did not belong to the respondent in the first place. Debts from identity theft or debts discharged in bankruptcy take up the remainder of this category.”
According to the website MoneyTips.com, “A significant number of the abuses come from third-party debt collectors or debt buyers who have purchased uncollected debt for a few cents on the dollar. Each transfer of debt ownership increases the likelihood that information about the debt will be lost or incorrectly transferred — although truly abusive debt collectors probably do not care whether they are addressing the right party or not.”
If you have been contacted by a debt collection agency, it is important to know what to do to protect yourself. According the CFPB, “If you suspect a debt collector is not legitimate, ask the caller for their name, company, street address, telephone number, and professional license number. You can also refuse to discuss any debt until you get a written ‘validation notice.’ Do not give personal or financial information to the caller until you have confirmed it is a legitimate debt collector.”
Reg flags that indicate a “rogue” debt collector are:
- The caller refused to give you the address and phone number of the business
- The caller threatens you
- The caller refuses to give you detailed information about your debt
- You do not recognize the debt you are being asked to pay
- The caller asks you for sensitive financial information over the phone
Complaints about debt collection and other financial services can be made on the CFPB website. You can also view which specific companies receive the most complaints.
If you do have unpaid debt on credit cards or other accounts, there are legitimate way to reduce what you owe, or to pay it off over time.