Modesto Consumer Debt Collection Practices Deemed Illegal

March 12, 2012

Anyone facing a mountain of Modesto consumer debt will appreciate this: One of the country's largest debt buyers has been fined $2.5 million by the Federal Trade Commission for breaking the law.


As our Modesto bankruptcy attorneys understand it, Michigan-based Asset Acceptance, which operates throughout the country, was found to have violated the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

Their business model works like this: Asset Acceptance will buy old debt from places like credit card companies, gyms, or stores. They purchase it very cheaply, as the original company has essentially written it off. Then, Asset Acceptance proceeds to hound and harass those who owe.

Unfortunately, this in and of itself is not illegal (we wish it were). But there are very specific guidelines it must follow when doing so - and apparently, it wasn't.

The FTC lobbed a total of nine complaints against the company, which mostly included some form of deception. The most common form of this was threatening to sue for collection of the debt - when it would have had no legal right to do so. That's because after a certain amount of time passes, the statute of limitations for suing on a particular debt has passed (it's called a time-barred debt). That didn't stop the company from making the threat. And what's more, they didn't tell people that if they made a partial payment on the debt, they could be unwittingly extending that statute of limitations.

David Vladeck, Director of the FTC's Bureau of Consumer Protection, was quoted by consumer reports as saying most people don't understand what their rights are in these situations. He went on to say that it's best to contact an experienced attorney before caving to the strong-arm, thug-like tactics of some of these agencies.

Additionally, the issue of time-barred debts is so common that the FTC has issued informational guidelines to educate consumers. The basics of this information are this:

That under the Fair Debt Collection Practices Act, there is a statute of limitations on how long a company has to sue you over a debt. The length of this debt is generally anywhere from 3 to 10 years, but it varies from state to state and also depends on the kind of debt.

A debtor doesn't have to tell you that a debt is time-barred, but you are certainly within your rights to ask. If the company gives you an answer, by law, that must be a truthful answer. If it won't give you an answer, you can dispute the claim by sending them a notice in writing, asking when your last payment was and telling them you want to verify it. Collection agencies have to stop contacting you until they provide you with verification.

If your debt is time-barred, you basically have three options: don't pay your debt, pay a partial amount on the debt or pay off the debt. Each one of these options carries its own benefits and consequences, and your best bet is to speak with an attorney before you decide. For example, if you don't pay your debt, the company may not be able to sue, but it could hurt your credit. If you pay a partial amount, the debt becomes "revived, the clock restarts on that statute of limitations and the company can sue you. If you choose to pay off the debt, the company may be willing to accept less than the full amount. It helps to have an attorney who is knowledgeable on such matters and can assist you.

If you or someone you know needs to speak to an experienced and knowledgeable bankruptcy lawyer in Modesto or Stockton, contact the Law Offices of Robert J. Anaya for a free and confidential appointment. Call today 1-209-522-7500.

Additional Information:

Debt buyer fined $2.5 million for deception over collection of old debt, By Maggie Shader, Consumer Reports

More Blog Entries:

Modesto Consumer Debt Could Result from Tax Scams, IRS Warns, Feb. 27, 2012, Modesto Bankruptcy Lawyer Blog