“Terms of Endurement”: Debt Collector Harassment

Dallas, TXWhile debt holders and bill collectors will always maintain that they play by the rules, the reality is otherwise for a large cross section of consumers who continue to be harassed with threats and other related tactics, and even loan terms that constitute a form of harassment. Little wonder that so many Americans feel they have little choice but to fight back with a debt collector lawsuit.

Take student loans, for example. The Consumer Financial Protection Bureau (CFPB) went on the record in late October over concerns the organization has about the student loan business - specifically, charging unnecessary late fees and other forms of payment allocation designed to maximize late fees from students already struggling to pay off their student loans.

For example, holders of student debt have been known to charge late fees on loans that are in deferment or are subject to a grace period and thus, a late fee is inappropriate. The CFPB also notes that it has seen reports of lenders falsely telling students that it is not possible to discharge a student loan through bankruptcy. While it is true that student loans are somewhat more difficult to discharge within a bankruptcy proceeding than other forms of debt, the CFPB notes that student debt discharge within bankruptcy is not impossible. It’s a form of bill collector harassment to say otherwise.

“Students are already struggling with crushing amounts of loan debt,” CFPB Director Richard Cordray said in a statement, warning lenders that the agency “intend[s] to hold [lenders] accountable for how they treat borrowers.”

Then there’s the story of a Texas mom from Dallas, who became caught up in the spiral of payday loans following a string of financial and family hardships. Cynthia, whose story was profiled in the nerdwallet finance blog (11/7/14), asked that her last name be withheld.

Her story is compelling. Cynthia and her husband of 25 years lost their home due to foreclosure in 2009. That was followed by a declaration of bankruptcy. Then, in 2012, the couple was issued a steep bill for electricity costs they couldn’t pay, so Cynthia sought a solution through the online payday lending market - eventually securing about $2,000 in funding from a handful of different lenders.

According to nerdwallet, it cost her $10,000 to borrow that $2,000. Each month, she owed $1,656 in monthly interest payments to four lenders, in order to service that $2,000 debt.

If that wasn’t bad enough, there was the debt collector harassment Cynthia was made to endure. She reported receiving three or four calls per day from each company, totaling up to 16 calls in a 24-hour period. The nature of the calls, Cynthia reported, was nothing short of bill collector harassment.

Examples of the debt collector harassment Cynthia endured included threats to freeze her bank account (to which the online payday lenders had access), accusations of fraud and threats to file a lawsuit against her. Cynthia was also threatened with having her situation reported to the credit bureau.

Such tactics are expressly forbidden under the Fair Debt Collection Practices Act, a federal statute that governs the framework by which a debt collector can pursue a debt.

In the aftermath of the bill collector harassment that Cynthia endured for about two years, the Texas mom was forced to close her bank account. She also lost her job. And her family, nerdwallet reports, was homeless for a period of time. But she endured, and paid off the last bit of debt in April of this year.

It is not known if Cynthia has or intends to file a debt collector lawsuit.