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Debt Collectors Using New Tools to Crush Debtors

December 29, 2015
Plain English Version


You may not remember you owe money. Or you may have thought you paid a debt off. It may not matter. Debt collectors are taking you to court.

Debt collectors buy unpaid debt from the lenders or credit card companies. They pay pennies on the dollar for the debt they buy. Then they go after the borrower for the full amount.

So far it is fair. The game soon changes. When borrowing the money or getting a credit card, the debtor agreed not to go to court if there is a dispute with the lender. He agreed to arbitration. That means someone other than a judge decides the case. Court rules do not apply to arbitrations.

After a few tries to collect the debt the creditor goes to court. The borrower gets a legal letter telling him to appear in court. He usually does not show up, so the court rules for the creditor. Now the creditor can go after the borrower’s bank account and all his other assets.

What happened here? The borrower signed away his rights. The lender did not.

If the borrower gets a lawyer, the lawyer may not matter. When the lawyer shows the debt was paid, or the information is not accurate, the courts still do not take the case. They say it is in the hands of the arbitrator. The arbitrator has already ruled for the debt collector.

What can be done?

Not much. Some lawyers are trying to put together a class action lawsuit. That will bring a large group of plaintiffs together to press their case. However, The U.S. Supreme Court said class action lawsuits could not be brought in arbitration cases.

Advocates are trying to change the laws and rules. The road ahead to make things right is long.

Source: The New York Times December 22, 2015

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