Complaints against Debt Collectors Skyrocketed in 2020: Know Your Options

In 2020, the Consumer Financial Protection Bureau (CFPB) received more than 540,000 consumer finance complaints. That’s an increase of more than 50% compared with 2019. More than half of those complaints related to credit reports and other consumer reporting–more than double the number of complaints received in that category in 2019. Complaints also increased in several other sectors: 

• Debt collection complaints were up 10% compared with 2019
• Credit card complaints were up 20% compared with 2019
• Mortgage complaints were up 8% compared with 2019
• Car loan or lease complaints were up 20% compared with 2019

The only categories where complaints declined were student loans, payday loans and credit repair. Interestingly, student loan complaints were down just 36%, though most student loans were subject to a collection freeze throughout most of the year.

Dealing with Creditors and Debt Collectors in California

Many debt collectors–and even original creditors–count on people in debt being anxious, feeling guilty, and not fully understanding their rights and options. The foundation of dealing productively with people trying to collect money from you is to internalize this: You are not at their mercy. Repeat, you are not at the mercy of debt collectors.

Of course, the right solution for you depends on your specific circumstances. But, the first step is always to understand your options and what creditors and debt collectors cannot do. Some core rights, protections, and solutions you should know about include: 

Consumer Financial Protection Laws

State and federal statutes protect you from a wide range of shady debt collection practices, inaccurate credit reporting, and other tactics some debt collectors use to pressure you into sending them money you don’t have. If debt collectors are breaking the law, you gain a powerful negotiating tool. In extreme cases, you may even be able to sue or counter-sue them for money damages.

Protection for Your Bank Account

As of January 1, 2020, debt collectors can no longer empty your bank account to satisfy a judgment. At least $1,788 is protected from creditors to ensure that California families have the resources to pay for basic necessities. 

Negotiating with Creditors and Debt Collectors

Many debt collectors lead with bluster and big demands, leaving people in debt feeling defeated. But, it’s in the debt collector’s best interest to get something from you voluntarily, so don’t take their initial “the least we can accept is…” at face value. Figure out what you can afford and make an offer, or talk to an attorney that assists with debt negotiation.

Showing Up in Court

Too often, people equate being sued with a judgment. When a lawsuit is filed against you, you still have options. You may want to negotiate with the creditor to avoid a judgment, or you may want to fight the case in court. You may even have counter-claims. Debt collectors win most debt collection lawsuits because the people they sue tend not to appear in court. Default judgments are often entered against people who might have raised valid defenses and won their cases or negotiated for a favorable settlement.

Educating Yourself about Bankruptcy

Much unsecured debt, such as payday loans, credit card debt and medical bills, can be discharged in a Chapter 7 bankruptcy case. That means your obligation to pay the debt can be eliminated. If your problem is with secured debt such as mortgage debt or an automobile loan, Chapter 13 bankruptcy may give you a chance to pay the past-due balance over time, without risk of foreclosure or repossession based on that old delinquency. 

The Takeaway

The bottom line is that the debt collection industry often relies on scare tactics and emotional triggers to get people in debt to do what they want. Too often, this pushes people under financial stress to make bad decisions, such as giving the debt collector money that was intended for something more pressing, like rent or groceries. 

Responding to high pressure tactics can make a bad situation worse. If there isn’t enough money to go around, it’s important to know your own priorities and make reasoned decisions about what to pay first and how much you can afford to pay toward a particular debt. Your best defense against falling victim to high-pressure tactics is knowledge.

You can learn more about specific rights, protections, and approaches by following the links in the bulleted list above. But, when it’s time to make a decision and take action, a Los Angeles attorney experienced with debt resolution may be your best resource. The seasoned debt relief attorneys at Borowitz & Clark offer free consultations to help people in tough financial situations make the best decisions for them and their families. You can schedule yours right now by calling 877-439-9717 or filling out the contact form on this page.