Clara Gladue lay in a coma while thousands of dollars of her family’s credit card bills piled up.
Roughly four months later, when she woke up from the coma, the Georgia nurse practitioner was greeted with the news that the debt had grown to more than $12,000 and that her husband, a professor in Augusta, had been sued by an Atlanta-based debt collection law firm.
“When somebody is laying there in a coma and can’t pay their bills, everything should stop,’’ Clara Gladue said.
Her husband quickly entered a settlement agreement and began making the payments as agreed upon. But 20 days before the final payment was due, the debt collector filed a motion for a default judgment for the full amount of the debt, court documents show.
A battle is now raging in Washington, D.C. over ways that Georgia consumers like the Gladues can be better protected from contentious lawsuits by debt collection firms. Federal law already prohibits consumers from repeated phone calls and threats, but there are fewer protections that ensure lawsuits against consumers are based on accurate information about the debts they owe.
Amid concerns about troublesome litigation, the Consumer Financial Protection Bureau issued a new rule proposal in May. Industry and consumer advocates alike want the regulator to help set limits, saying debt collection lawsuits clogging courts nationwide don't help either side.
Lawsuits are "just not the best way to come up to an agreed-upon resolution,'' said Jack Brown III, president of the board of ACA International, a Washington D.C.-based trade group of creditors and debt collection companies. "I don't think anybody is going in with the intention of having bad information, but certainly mistakes are made when you're working such (lawsuit) volumes."
This spring, an Atlanta Journal-Constitution investigation found that small-claims courts in Georgia have been turned into debt collection mills. Collectors file hundreds of suits against consumers and devote little time to checking whether there was a basis for the claims or that they are suing the right person for the right amount.
To address concerns, one of the federal regulator’s proposed changes would require debt collectors to provide consumers with an itemized list of debts. That way, consumers can rest assured that they are paying a fair amount, and the debt collection company can successfully close out accounts without having to resort to lawsuits.
Consumer advocates, however, say that will fall short of stopping abuses.
The Boston-based National Consumer Law Center wants the regulator to hold collectors responsible by requiring an adequate review of admissible evidence before a lawsuit is filed.
Unsolved issues
Consumer advocates and some industry officials also agree that the proposed rule fails to address some of the most egregious abuses.
In her daily practice as a consumer attorney in metro Atlanta, Sabrina Parker said she sees widespread examples of cases in which clients have been sued for debts they don’t owe
“It’s a defense we use pretty routinely,’’ said Parker, who has offices in Peachtree Corners.
Consumers often do not understand that they are not obligated by law to pay old debts and can harm their credit rating if they do agree to repay them. In Georgia, a debt expires after about six years. But some debt collection firms sue even when the debt is too old.
The regulator has written in its proposal that collectors are prohibited from filing or threatening a lawsuit if the collector knows or should know that the legal time limit to sue has expired.
But consumer advocates want it to impose a downright ban on collection of time-barred debt in and out of court. Depending on debt collection firms to police themselves, won’t work, the advocates say. They want the regulator to make it a requirement.
Deceptive tactics are another common abuse, and Georgia has seen a string of cases alleging debt collectors have misled consumers.
In April, the Federal Trade Commission banned an Atlanta-based debt collection firm from business.
The agency accused Global Processing Solutions and nine interrelated companies of collecting more than $3.4 million from consumers in a “pay up or else” collection scheme that threatened consumers with lawsuits, garnishments, criminal charges and arrest.
“In some cases, consumers don’t even owe the debts that defendants are attempting to collect,’’ court documents alleged.
The proposed CFPB rule could help address confusions about claims of debts by requiring collectors to spell out all claims about money owed. The disclosure would have to include plain language information about debts as well as ways that a consumer can dispute the debt.
Settlement reached
This spring, Allen Gladue hired an attorney to dispute the amount the debt collector claimed he owed and not have a default judgment entered against him. In a court filing, he claimed that the debt collection firm had violated federal law because he had already paid off a portion of the debt.
In a court filing, the debt collection firm, Brock & Scott, said that he failed to file a timely response to the lawsuit. It also stated that the repayment agreement contained no provisions delaying its right to pursue legal remedies.
A confidential settlement was reached in his suit several weeks ago, court records show.
Allen Gladue declined comment.
Attorneys for Brock & Scott did not respond to requests for comment.
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What do you think about the proposed regulations on debt collection? The public has until Aug. 19 to comment on the proposal. Here's how.
- Email: 2019-NPRM-DebtCollection@cfpb.gov. In the subject line of the email, note that this is for docket number CFPB-2019-0022.
- Mail: Debt Collection, Bureau of Consumer Financial Protection, 1700 G St. NW, Washington, DC 20552
- Online: http://www.regulations.gov. Search for CFPB-2019-0022.
Should debt collectors be able to text consumers?
Debt collectors would be able to use text messages and email formats to contact debtors, under part of the proposed regulations by the Consumer Financial Protection Bureau.
Supporters of the idea say it can benefit those consumers who are uncomfortable talking to a stranger who phones them about their personal debts. And, if a consumer doesn’t like an email or text message, they can block it, advocates say.
“It’s a more consumer- friendly way to highlight information,’’ said Ohad Samet, CEO of a fintech platform, TrueAccord, which provides debt collection services for banks and financial institutions.
But consumers advocates see pitfalls in such communications.
Unless consumers opt to receive notices electronically, they should be provided validation notices by regular mail, the advocates say. They also note that text messages may be costly to consumers with limited data plans. And, if no limits are set on the number of texts debt collectors can send, the communications may overwhelm consumers.
Some debt collection firms also have expressed concerns. Some might not be able to easily convert to the new technology.
Lewis N. Jones has been a debt collection attorney in Metro Atlanta for several decades. He says he’s a lot of success by talking to consumers. It may take more time but often avoids a lawsuit.
His staff does research that examines the unique account of each debtor. By the time he’s ready to talk, he has a good grasp of the details of the debt. He just needs to learn more details about the debtor’s personal circumstances to establish what is a reasonable amount that can be paid.
“Just talking to them, I try to get them to come up with a number they can pay,” said Jones, who is now based in Metter.
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