As debtors feel pinch, states limit collections
WINSTON-SALEM, N.C. - States are cracking down to make sure aggressive debt collectors target only people who legitimately owe them money.
National consumer credit laws already prohibit collection agencies from harassing, deceptive, or unfair practices like telling neighbors or family about what is owed, or calling before 8 a.m. or late at night. Since the recession started, at least a half-dozen states have adopted additional limits, like imposing statutes of limitation on collections and adding opportunities to punish abusive practices in court.
Lawmakers are increasingly focusing on outfits that buy bad debt from lenders for pennies on the dollar and profit when they collect more than they paid.
Debtors - some agree they owe money, others say they’ve already paid or are disputing their bills - have reported being bombarded with calls and subjected to foul language and threats.
A North Carolina law that took effect this month requires debt buyers filing collection lawsuits to produce documents proving they’re the ones owed the money. Trying to collect on a debt that a company should reasonably know is invalid could lead to lawsuits and civil penalties.
Other states including Idaho, Colorado, New York, Arkansas and Maryland, along with New York City, have also passed more explicit rules for debt collectors. Legislators in several more - including Massachusetts and New Jersey - have pushed bills that could come up again in next year’s legislative sessions.