Here's why consumer regulations are useless...

Consumer Affairs has a report on a debt collector hit with fines for, of course, abusing consumers and lying. The amount of the fine? 1.3 million.

Maybe I'm just a pessimist, but I don't see how this solves anything.

By abusing consumers, making illegal threats, etc, this company likely raked in millions in extra profits. They collect 1.25 million accounts per year. A 1.3 million fine from the FTC is probably listed on their financial report as overhead, along with electricity. Is the FTC making any difference? Of course not...we know this because they allowed this fraudulent company to stay in business.

Under the proposed settlement, LTD will pay a $1.375 million civil penalty. In addition, LTD and its owners, Timothy Feldman and Leonard Pruzansky, and its top managers, John Brewster and Derrek Davis, are permanently prohibited from misrepresenting to consumers that nonpayment of a debt will result in garnishment of wages, seizure or attachment of property, or lawsuits.

They also are permanently barred from using false, deceptive, or misleading representations in connection with the collection of any debt, communicating with a consumer at any unusual time or place, including their place of employment, or harassing, oppressing, or abusing any person.

Is anyone else laughing at this "punishment"? Aren't all of these things already illegal?

Imagine...you rob a bank for 5 million dollars, so the state sues you for 2 million and permanently prohibits you from robbing any more banks.

This is why our regulations are useless...because companies are free to abuse consumers with impunity.

What if a collector calls you?

What would you do if a collector called you? First, assume that this isn't a case of identity theft or a wrong number. You just got a call from a collector, they say you owe such and such, and you know it to be true. What should you do? Here's what I would do...

1) Don't admit to the debt. Get their phone number, case number, and mailing address. Hang up, ignore all further calls.

1a) If they refuse to give you this information (and many will) just hang up.

2) Pull your credit report. Go to annualcreditreport.com and obtain a copy of your report. There is a section that will show you what agency is after you (usually at the top under "In Collections". If not, you can see what companies probably reported you. Call THEM and find out what agency they sold/outsourced your debt to.

3) Write a certified letter with receipt request to them informing them that they are not permitted to contact you regarding this debt. They can still send letters - that's okay - which is what you want. In my experience, all collectors are scum. Assume every word they say is a lie, you need everything in writing.

4) Write a letter demanding verification of the debt. Write the company directly with a copy of the letter.

5) Pay your debt if you can. You owe it, you should pay it. Write another letter saying you will pay it in full and that they must report the debt as "Paid in Full", or "Paid as Agreed", something similar. Make sure they agree to those terms in writing before giving them any money.

5a) If you can't pay, write to them and tell them what you CAN pay. This may take a few letters back and forth, but eventually you will probably come to some kind of agreement. You are of course keeping copies of all your outgoing and incoming letters, and they are all going out certified with receipt requested.

6) Send them a check, cashiers check if you prefer, of the agreed upon amount.

7) Check your credit report after a month to verify that the debt shows paid. Repeat every month until it does. If it doesn't after a couple of months, write them again with copies of your original letters showing the agreement as well as verification of the payment. Repeat until they comply. If a couple letters don't work, write to the attorney general, bbb, anyone you can think of.

8) If all else fails, get a lawyer. If you can't afford one, and you've already been through steps 1-7 and somewhere along the line they decided to break the law and violate their agreement, you can always file in small claims court. Sue em. It costs you around $35 depending on the county. As long as you have all your documentation, any sane judge should rule in your favor. I'd even ask for loss in wages and court filing fees, though I wouldn't expect it.

Getting a debt settled with a collection agency isn't easy, and isn't quick. The problem is that so many of them generally screw people over on a regular basis. So you need to do everything by snail certified mail, so it will take a while (maybe a few months) just to get to the part where you actually agree to pay them something. This is okay. If you are trying to buy something (like a house) and instead finding yourself dealing with collectors, don't sell yourself out and open yourself open to being screwed by going the easy route and giving them a credit card number over the phone to pay them and assume everything will be hunky dory. Just wait to finance that whatever.

Assume collectors are scams

A friend of mine recently received a collection call. It sounded legit, they had a balance owed, a name, to what company the debt was owed, etc. But during their entire conversation, the collector refused to answer where she was calling from, what their phone number was, or who they were.

Is this common? They wanted her to make a payment over the phone, but refused to tell her who they were or how to contact them. The first thing I thought was: scam. But in reality, she did owe this debt and needed to pay it. Obviously these collection agencies are just running loose without any regulation (at least, enforced regulation) and doing anything they please. What right minded individual would just give bank account information to a random caller?

"Yes, unidentified telephone voice, here's my bank account number, I trust you not to empty my accounts or steal my identity."

Yeah, right. If you ever get a collection call, immediately ask their phone number and name of their company, and a case reference number. Try to get their address if you can, but by then they will probably be calling you names and threatening to take your dog. Then immediately hang up and MAIL by certified letter a demand not to communicate by phone and only by mail, with a demand to see all of the documentation related to the debt. The same day, pull your credit report and check to see if it is there. It may not be on there yet.

If you can't get any information out of the collector, and its not on your credit report, it could possibly be a scam. If it is legit, the collection agency contact information will be listed on your report. You should always get a number and a case reference, verify the validity of the agency, and call them back. Better yet, you should always do all correspondence by certified mail, otherwise you will not have a paper trail to verify any "negotiations" that you made with the agency. You can safely assume any collector is lying, and you need to protect yourself. The only time you should give financial or personal information out is when you initiate the communication.