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Published: Sunday, 1/20/2008

Caveat debtor

MOVE over Nigerian bank account scammers. There's a new crook in town, one who plays on fear to sucker the unwary into paying thousands of dollars to get out from under old debts they may no longer owe.

While the vast majority of debt collection agencies are legitimate businesses doing a dirty job, the industry has long had a bad name because of those firms that use strong-arm tactics to get people to pay up.

The latest wrinkle in this tawdry business involves outfits that buy up the right to old debts, many of which are no longer owed because they were paid or the statute of limitations, which in Ohio is a liberal 15 years, has run out.

Often armed with no more than a name and an amount owed - bought from an old creditor for two or three cents on the dollar - they access credit records and find personal information, including the names, addresses, and telephone numbers of relatives of the original debtor. Then they call the person, along with an unsuspecting relative, to claim legal action is pending (which is often not the case) that can be stopped by paying off the debt (to which they've added bogus fees and charges).

Often these bottom-feeders confuse names and go after the wrong person, but they don't care who pays as long as they scare someone into opening their wallet. They offer little documentation because they don't have it or what little exists shows that the debt's been paid or is no longer collectable.

If repeated calls don't work, they sometimes resort to an electronic ploy called "phone spoofing," which substitutes an authoritative name - "Sheriff's Department," for example - on caller ID devices. Then someone identifying himself as "Deputy" so-and-so calls to say he has a warrant to be serve but first wants to offer an opportunity to resolve the debt.

Bud Hibbs, a Fort Worth-based consumer advocate, says one such company that worked out of Buffalo, then moved to the Atlanta area, and now is back in Buffalo (each time a step ahead of the law), makes $250,000 per month using these methods.

Experts point out that the best way to avoid debt collectors is to honor debts. People who get in over their heads should act responsibly, negotiating payment arrangements and learning to live within their means. Also, legitimate collection agencies have a right to use all legal means to collect debts. But that doesn't give scavengers like these the right to lie, bully, and threaten.

Mr. Hibbs and other consumer-debt experts say people who get such calls should know their rights under the Fair Debt Collection Practices Act. First, they say, don't give a caller any personal information, especially not credit card or bank details.

Second, demand documentation validating the claim. In Ohio, you are allowed to record conversations with collection agencies, and you don't have to tell them you're doing it. Third, do not simply ignore a threat of litigation. While the vast majority of these cases are thrown out of court if contested, these low-lifes hope the debtor won't go to court so they can obtain a default judgment. A default judgment can still be successfully contested but can become a more difficult and costly process.

Instead, experts say, consult a consumer law attorney, local referrals for which can be found online at naca.net. Initial consultations usually are free, and some attorneys will work on a contingency basis and sue the bogus debt collector for attorney fees and damages.

The bottom line, to paraphrase a famous Latin dictum, is let the debtor beware.



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