subject: America's Debt Collection Crisis [print this page] America is in a debt collection crisisAmerica is in a debt collection crisis. Consumers owe more debt than ever, have fewer assets than ever with which to pay it, and debt collectors and their lawyers are getting more aggressive by the day in trying to collect it. Analysts will be pontificating for years, but it wasn't that long ago when - on paper at least - our assets painted a rosy picture. The stock market was booming, home values were skyrocketing, 401(k)s were going through the ceiling, and everyone believed there was no end in sight. People weren't saving money, and were spending more than they made. Predatory lenders were offering too-good-to-be-true deals on everything from sofas and cars to home loans and vacation rentals. Not anymore.
Debt collection is a double whammy. The economic crash that began in 2008 has caused the dominoes to keep falling. The big guys - like AIG, Lehman Brothers, and Bear Stearns - may have been the first to tumble, but the winds of this tsunami soon whipped through every level of society. Everyday consumers were faced with paying back extraordinary amounts of debt (a total of $2.5 trillion, at last count) just as their assets were going up in smoke. Home values took a nosedive, erasing home equity overnight and leaving many people "upside down" in their mortgages. Medical bills bankrupted millions of Americans. Dreams of retirement evaporated along with the worth of 401(k)s. To make matters worse, unemployment has moved into double digits in many areas of the country, leaving those burdened by debt without the means to make even minimum payments. So, while consumers face huge debts, banks must raise capital, leaving them no choice but to sell delinquent accounts to debt collection sharks who pick them up on the cheap. By the same token, since debtors have no money to pay off delinquent debt, debt collection agencies must get more aggressive in order to collect at least a portion of the money owed.
It is against this backdrop that debt collectors have descended on consumers like so many vultures over a fresh kill. The U.S. government bailed out financial services companies like AIG, stress-tested and financially supported banks deemed "too big to fail," and even became a major stakeholder when General Motors declared bankruptcy. Yet, although a new law limits credit card rate increases and fees, consumers haven't been party to the government's largesse.
In fact, the financial crisis and new regulations have made the credit crunch that much tighter. Banks have not only cut back on extending credit, but they're getting more aggressive in their debt collection practices. In a nutshell, just when consumers need to be cut a little slack, bill collectors are hounding them with a vengeance.
If you owe money and are unable to make your minimum payments, you've no doubt been on the receiving end of debt collection efforts. What you may not realize, though, is that there are very strict guidelines about what debt collectors may and may not do when they attempt to collect payments. In other words, while you may owe the money, you have rights against harassment and abuse. The federal Fair Debt Collection Practices Act (FDCPA) regulates the behavior of debt collectors, and even outlines penalties for those who break the law. In passing the FDCPA, the U.S. Congress recognized that, "Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of personal privacy."
Far too many people spend sleepless nights worrying about debt collector calls. Marital rifts arise out of the inability to pay bills and the feelings of helplessness that accompany that dilemma. Many consumers have been psychologically and emotionally beaten down by debt collectors who have crossed the line.
Debt collectors seize upon consumers' vulnerabilities, and count on the fact that most people don't know what constitutes illegal behavior. If you are on the receiving end of debt collection calls, it's important to understand your rights under the FDCPA, and what you can do when debt collectors cross the line.
Remember that there's always light at the end of the tunnel, and that good information and a cool demeanor will empower you to move through these difficult times.
by: Sergei Lemberg
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