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Invalid Debt Claims

Monday, October 15, 2007

Debt collection agencies are expected to draw more revenues in the coming years from defaulting credit card holders and other credit consumers abusing their paying obligations. There are a few fair reasons for the funds rise with debt collectors, no doubt, but state attorneys are surprisingly receiving more and more bitter complaints about the collectors' practices.

It would be expected, however, that credit card deal makers who fall victims to debt collection companies would be discontent with their tough and humiliating ways, but there seems to be another cause for concern. What is it and what changes does it bring into legislation?

Let's fist mark out the main reasons for the revenues rise in the debt collection industry.

The basic reason is connected with the general increase of credit card deal makers displaying credit insolvency and thus huge outstanding balances. Statistics shows that US credit consumers will accumulate approximately $3.2 trillion in credit debt, giving debt buyers and collectors a highly profitable ground.

Then, it has always been assumed that credit card debt is a complete fault of irresponsible customers with poor spending habits and bad credit management. But as lawmakers are trying to find and establish some balance between customers and banks, they have detected some predatory actions on the part of the latter.

As a matter of fact, credit card companies have the legal right to raise the interest rates and fees on your deal any time and for no particular reason. If you pay your credit card bill too late, you are charged late payment fees, as detailed in the fine print. But you would be most upset and outraged when they punish you for paying before the due date or even on time!

Thus, the company is free to set a new interest rate on your credit card even if you are a good credit risk and own an unsecured credit card. With the creditor's knowledge of the potential risks drawn by the rate increase, their policy seems to be purely self-profiting.

All this creates dissatisfaction among credit cardholders which, however, has become common already due to inability to change the credit company ways.

A much more serious concern accompanied by complaints is caused by the aggressive attempts to collect the debt customers didn't really make. A recent poll has shown that the growing number of complaints is related to collecting the debt which is the result of identity theft.

The situation has attracted close attention of lawmakers who have considered the introduction of a new law under the circumstances. The new bill is aimed at prohibiting collectors to proceed with their activities if the customer claims he is victim of identity theft. The collector is then to investigate the case and if it proves to be true, the collection activities must be stopped and the correct information sent to credit bureaus.

While the effect of the soon coming law is still uncertain, there is yet another burning issue to occupy the minds of lawyers - the dramatic rise of the debt buyer industry and the increase of consumer debt caused by unfair credit companies' policies.