As the recession winds down, consumer advocates say abusive practices by debt collectors are on the rise.
The issue is getting renewed attention here in Minnesota. Attorney General Lori Swanson announced a proposal on Monday to tighten regulations for companies that buy up debt and to protect consumers from abuse. Both advocates and debt collectors appear to support the proposal.
When military veteran Jason Christiansen returned from a second overseas deployment with the Marine Corps, he took a job fixing cars. Life as an auto mechanic at a busy south metro dealership was busy and profitable.
But the good times did not last. When the financial crisis hit in 2008, Christiansen lost his job. His new job as a mechanic paid less than half his old salary.
By the beginning of 2009, Christiansen's phone started ringing with debt collection calls — as many as 60 calls a day.
"I started getting voicemails that were literally threatening — threatening my life, swearing at me, calling me names that I can't repeat," Christiansen said.
At the time, Christiansen owed at least $40,000, not including thousands of dollars in student loans.
The harassing phone calls soon spread to family members and his job, even after he told callers he was not allowed to take personal calls at work. Collectors repossessed Christiansen's car and garnished his wages.
It became so stressful that Christiansen cleaned his apartment and wrote a suicide note. He took a gun and put it in his mouth.
"Shotgun ready to go and I remember thinking, 'Man, I'm glad I'm tall I can reach the trigger from here,'" Christiansen said.
But he didn't pull the trigger. Instead, he sought help.
“Saying things off the hook just to get under their skin in order to collect more money. The process itself is flawed in the sense that it creates its own problem.”Mark Vavreck, consumer attorney
His attorney Mark Vavreck says the harassment Christiansen experienced is common, especially by debt buyers.
Those are collection companies that buy up big portfolios of debt from credit card companies, lending institutions or other debt buyers for pennies on the dollar. Then they often do almost anything they can to collect, Vavreck said.
"Saying things off the hook just to get under their skin in order to collect more money," Vavreck said. "The process itself is flawed in the sense that it creates its own problem."
Federal law regulates what collectors can legally say and do to collect debts. The law prohibits threats, harassment and misrepresentation. The federal government also recently bolstered oversight of large collectors under the new Consumer Financial Protection Bureau.
But state law is weak, Vavreck said.
"The federal law could still stay the same of course, fine. But the statute in Minnesota — we could get some teeth to it, and I think that would be useful," he said. Figures from the Minnesota Association of Collectors show more than 33,000 licensed collectors operating in the state. It's unclear how many are of these are debt buyers.
The bipartisan legislation announced this week by Attorney General Lori Swanson would require collectors to show more proof the amount they're trying to collect is accurate. Collectors would also have to show they are going after the right person for the debt.
Swanson said currently it is common for collectors to win default judgments in court when consumers do not respond to notice of a lawsuit. Winning a default judgment opens the door for collectors to garnish wages with or without a person's knowledge or consent — whether or not they actually owe the debt in the first place.
"You win just by showing up, but in the American court system you are not supposed to win your case unless you prove your case," Swanson said. "What the proposal does is basically put the burden of proof on debt buyers before they can get a judge against a consumer to prove their case."
The Minnesota Association of Collectors is working with the attorney general and lawmakers on the language of the new proposal. The organization's Vice President Tom Gavinski declined to comment on the specifics but said his organization supports requiring more documentation for collectors.
"To clarify that language so we can all understand what the rules are. And anytime you clarify the rules it's good for the industry and the consumer," Gavinski said.
He blames a few bad actors, like unscrupulous debt buyers who pursue consumers without adequate documentation, for giving the industry a bad reputation.
Vavreck said the attorney general's proposal does not go far enough. Rather than pass new rules, Vavreck wants the state's existing laws strengthened to allow more people to sue collectors in state court.
"Minnesota consumers deserve to be protected just as any consumer does," Vavreck said.