Getting a call from a payday lender or debt collector can be frightening. If you’re lucky, it will be a pleasant conversation on how you can repay the debt. But sometimes it can veer into areas that aren’t legal and are harassing.
In a new report highlighting how nonbank financial institutions are complying with federal consumer financial laws, the Consumer Financial Protection Bureau details ways that consumers are being illegally harassed. Here are five of them:
Legal action threatened
When payday lenders called borrowers to collect debt, they sometimes threatened to take legal actions they did not actually intend to pursue, according to the CFPB. The federal agency’s examiners cited these threats as unlawful deceptive practices.
Other lenders threatened to impose additional fees or to debit borrowers’ accounts at any time, even though this wasn’t allowed by their contract. Examiners also found lenders lied about non-existent promotions to induce borrowers to call back about their debt.
Payday loans are frequently described as a way for consumers to bridge a cash flow shortage between paychecks or the receipt of other income. Payday loans often have small-dollar amounts, require borrowers to repay quickly, and ask that a borrower give lenders access to repayment through a claim on the borrower’s deposit account.
Debt collectors were also found to illegally threaten legal action. It’s estimated that there are more than 4,500 debt collection firms in the United States.
The CFPB found that debt collectors violated the Fair Debt Collection Practices Act (FDCPA) by filing lawsuits, which implied that they intended to prove their claims, when they had no such plans. The collectors typically dismissed the suits if consumers answered them because they were then unable to produce the documents to support their claims.
Excessive calls from debt collectors
CFPB examiners found that payday lenders called borrowers multiple times per day. When lenders failed to accurately track how many times they had called a borrower, it increased the risk of a borrower receiving excessive calls.
Examiners found that one debt collector had made approximately 17,000 calls to consumers outside of the appropriate times established by the FDCPA. That company further violated the law by repeatedly contacting more than 1,000 consumers as often as 20 times within two days.
Harassing borrowers at work
Examiners also found that employees of payday lenders would sometimes visit borrowers’ workplaces in attempts to collect debt. Such practices by lenders can violate the Dodd-Frank Act’s prohibition on unfair practices.
Harassment by third-party collectors
Many payday lenders hire third parties to collect their debts. The CFPB says it expects payday lenders — and all institutions subject to its supervision — to oversee their service providers to ensure they are complying with federal law.
Examiners found that third-party debt collectors misled borrowers in a variety of ways, including falsely claiming to be an attorney and making false threats of criminal prosecution. Third-party collectors also harassed borrowers by calling at unusual times.
Credit report disputes not investigated
Debt collectors often furnish information to consumer reporting agencies, which use it when compiling consumers’ credit reports. Debt collectors generally must investigate when a consumer disputes information they have sent to a consumer reporting agency.
Examiners found evidence that a debt collector was deleting disputed accounts rather than investigating such disputes, and examiners directed this collector to investigate disputes it receives regarding information it furnished.
Have you ever been called by a debt collector? How did the call go? Leave your response in our comments section below.