Consumer Law

"Debt Tagging" Is A Growing Problem

By M. Stan Herring

The Washington Post has posted an article about the growing problem of debt tagging. Debt tagging is when debt collectors relentlessly contact a consumer about a debt, the problem is that the person being contacted doesn't owe the debt. Sometimes this is because debt collectors confuse two people with the same name and contact the one who doesn't owe the money. The debt can even show up on the wrong person's credit report. Sometimes it's intentional, such as calling a wrong number constantly to try and pry information from whoever answers. They can then take that information and use it to convince the person that they owe a debt they really don't.

With the economy being so poor, people are exceptionally mindful of anything that could harm their credit score.

The FTC said it recognizes that third-party collectors contact millions of people each year, and it receives more complaints about the debt-collection industry than about any other.

In its 2010 annual report on the Fair Debt Collection Practices Act, the FTC said it received 119,364 complaints about third-party and in-house debt collectors in 2009, up from 104,766 the previous year. To be sure, people who receive mistaken calls from debt collectors don't always report anything to regulators. In Hughes's case, he contacted fraud resolution specialist Identity Theft 911 to help repair the damage to his credit report. He said he hasn't heard from collectors since.

Mark Sciffman, a spokesman for ACA International- a credit and collection trade group- said the FTC doesn't separate consumer complaints from inquiries and his agency has worked with the FTC to try and get more "clarity on its complaint data," but it hasn't happened yet. He says complaints should be taken very seriously and they always work with consumers to resolve them.

J. Reilly Dolan, assistant director of the FTC's Division of Financial Practices in Washington, said his team made a point of bringing the CBCS case.

"It's not an isolated incident," Dolan said. "We want a case out there to make sure everyone understands it's not acceptable." He said the FTC expects to continue challenging such practices.

Kristin Mack Deuber, a spokeswoman for CBCS, said that the FTC's allegations involved activities that took place years ago, from 2005 to 2007, and the settlement didn't necessarily constitute a finding or admission by the company that it violated the law.

Experts say that tracking a debt back to its proper owner can be surprisingly complicated. Creditors can sell their debts to other collection companies, for a fraction of the original value, and don't always include information on who owes the debt. Debts can also be sold several different times, and end up in several different hands, and information gets lost or becomes inaccurate along the way. Things a consumer does, like moving or changing a phone number, throws debt collectors off and results in the wrong people being contacted about a debt.

Those seemingly random connections can pay off for collectors. Some will pursue a person who might cave under pressure. Mark Fullbright, fraud specialist at Identity Theft 911, said CBCS called one of his clients, Molly Harrington, and managed to get her to divulge her Social Security number. Then Harrington, 75, got a bill for $4,197 from an electric company for power at a home in Putnam, Conn. But she was from Chepachet, R.I., and had never lived in Connecticut; someone reported the debt under her name in her credit history early this year.

Fullbright ended up making the phone calls to remove the debt from her file. He said that he was put on hold about eight times. When he challenged CBCS for proof that Harrington owed the money, he said, the collection agency didn't tell him much until he threatened to report them. "I don't know how they let this go on for such a long time," Fullbright said

If you see debts on your credit report that aren't yours, you can dispute them. The credit reporting agency will take the information to the original source to verify the debt. It's up to the creditor to provide proof of the debt. The process takes around 30 days then the corrected credit report is sent back to the consumer. If you're being harassed by a debt collector it's important that you document everything. Send a letter, with delivery confirmation, and inform the debt collector that they are contacting the wrong person and you don't want to be contacted again. If the contact doesn't stop you should talk to a lawyer.

If you have had problems with errors in your credit report or have been harassed by a debt collector and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on September 14, 2010 (boomark / email).