{"id":16123,"date":"2021-06-17T14:35:03","date_gmt":"2021-06-17T20:35:03","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=16123"},"modified":"2024-05-03T13:29:25","modified_gmt":"2024-05-03T19:29:25","slug":"illegal-debt-collection-practice","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/finance\/illegal-debt-collection-practice.html","title":{"rendered":"8 illegal debt collection practices and how to spot them"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

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Illegal debt collection practices include debt parking, phantom debt collection, not providing sufficient communication of debt, creditor harassment and more.<\/h2>\n<\/div>\n\n\n\n

While many debt collectors are prone to making honest mistakes, many knowingly break the law in an effort to collect debt from you. In 2019, approximately 75,200 consumers filed complaints regarding debt collectors\u2014all of which were related to unfair and abusive debt collection practices. <\/p>\n\n\n\n

Attempts to collect debt not owed continues to be the most common debt collection practice. According to the Bureau of Consumer Financial Protection\u2019s annual report<\/a>, 48 percent of people said they were asked to pay a debt that was not theirs and 25 percent said they were charged with a debt from an identity fraud instance. Aside from this, 22 percent said they had already paid the debts, while four percent of consumers said the debt was discharged in bankruptcy and was no longer owed. <\/p>\n\n\n\n

To stop these actions from occurring, the Financial Trade Commission issued the Fair Debt Collection Practices Act<\/a> (FDCPA), which makes it illegal for debt collectors to use these unfair collection practices. <\/p>\n\n\n\n

To avoid falling for these debt collection scams, it\u2019s important to know your rights under the Fair Credit Reporting Act (FCRA) and FDCPA. Below we address common illegal debt collection practices as well as tips for protecting and understanding your rights. <\/p>\n\n\n\n

1. Debt parking<\/h2>\n\n\n\n

Passive debt collection, also referred to as \u201cdebt parking,\u201d is a common tactic used by debt collection agencies where they place false or questionable debts onto a consumer’s credit report without contacting the consumer. These debts often go unnoticed by the consumer until they apply for a loan or a job. <\/p>\n\n\n\n

These debts will show up when their credit report is evaluated, and to avoid interfering with the approval process, the consumer may choose to pay off the debts rather than file a dispute. 
This tactic has unfortunately been used many times, with the Midwest Recovery Settlement<\/a> being a prime example. According to Andrew Smith, director of the FTC\u2019s Bureau of Consumer Financial Protection (CFPB), the defendants on this case \u201cused this illegal \u2018debt parking\u2019 to coerce people to pay debts they didn\u2019t owe or didn\u2019t recognize.\u201d<\/p>\n\n\n\n

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2. Phantom debt collection <\/h2>\n\n\n\n

According to the FDCPA, debt collectors are prohibited from misrepresenting the amount of debt you owe. Phantom debt collectors violate this act by reporting debts that have never existed, are already paid for or are past the statute of limitations<\/a>, which they do not have legal rights to collect. <\/p>\n\n\n\n

In 2019, 45 percent<\/a> of consumer complaints that were filed were because of attempts to collect debts that were not owed. These debt collectors will often use aggressive, deceptive and threatening behavior in an attempt to collect funds from consumers. <\/p>\n\n\n\n

3. Not providing sufficient communication of debt <\/h2>\n\n\n\n

The FDCPA<\/a> requires debt collectors to provide consumers with a written notice within five days of contacting them.<\/p>\n\n\n\n

In 2019, 65 percent<\/a> of consumers said they did not receive enough information to confirm ownership of their debt, while 30 percent complained that their notice did not include information on their right to dispute. <\/p>\n\n\n\n

By federal law, the collection agency must send you a written notice detailing: <\/p>\n\n\n\n