Running Scared: Debt Collectors Who Threaten Consumers

    Debt collectors frequently use threats to extract payment from the more than 70 million consumers who fall behind on their bills, the Consumer Financial Protection Bureau reports in a new study of collection industry practices.

    The federal agency reported that one-in-four consumers contacted by collectors in the past year felt threatened, and that more than 40% asked creditors or collection agencies to stop contacting them. Three quarters of the time, the requests were ignored.

    The report underscores how widespread debt-collection problems are in a nation that runs on consumer credit. More than 6,000 debt-collection agencies are part of a multi-billion-dollar industry that uses phone calls, letters and lawsuits to claw money from consumers with unpaid bills.

    “Some debt collectors care only about squeezing as much as they can from the names on their lists,” said Richard Cordray, the Consumer Bureau’s director. “Some make the calculation that their chances are being called to account later are remote.”

    Though collecting debt is legal, laws prohibit collectors from contacting people during inconvenient hours, ignoring requests to stop calling and making threats.

    Consumers complain about debt collectors more than any other business in financial services industry. The bureau said part of the problem comes in how collectors are paid. Most collection agencies reward employees for what they collect, giving them an incentive to use questionable, and sometimes illegal, tactics.

    “We have seen that many consumers report being harassed or threatened with illegal actions, such as threats of arrest or jail time,” Cordray said.

    Part of the problem is structural. When consumers fail to repay debt, whether it’s a credit card balance or a medical bill, that creditor will coax the debtor to pay. If that doesn’t work, the debt is often sold for pennies on the dollar to collection agencies, which are then free to try to recoup the money. The bureau found that tactics often include harassment.

    The consumer bureau said that collectors often lack a relationship with the borrower and, as Cordray said, “make the calculation that their chances of begin called into account are remote” if their tactics are deceptive or abusive.

    Unrelenting attempts to collect are among the biggest consumers complains. The report said that nearly 40 percent of consumers said that debt collectors attempted to contact them four or more times a week. Significant numbers said even more attempts were made.

    More than half of those who reported being contacted in the prior year said that at least one collection effort was a mistake. They said the creditor or collector sought an incorrect amount, that the debt was not owed or that the person owing the debt was another family member.

    Although collectors are prohibited from contacting people at inconvenient times without permission, more than a third of those surveyed about their experiences said they were contacted between 9 p.m. and 8 a.m.

    The bureau mailed surveys to 10,000 consumers to collect responses for the study and received 2,000 replies. Since it began operations in 2011, the bureau has filed 25 lawsuits over abusive or deceptive debt collection practices, yielding $100 million in civil penalties and $300 million in restitution to consumers.

    Consumers with debt problems often turn to nonprofit credit counseling and debt management agencies for help. Such steps can help resolve issues with creditors, avoiding some of the problems detailed in the CFPB’s report.


    Bill Fay
    Staff Writer

    Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at

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