Debt Collectors and the Courts
June 16th, 2016 by Bunch & Brock
There’s a reason they call it drowning in debt. Owing money can feel like never-ending waves of responsibility, alternating between hope that the tide is turning in your favor and despair that you are going under. Financial obligations can overwhelm any of us. Many well-intentioned Americans struggle with credit card debt, mortgages, medical bills, student loans, and more, often just one paycheck away from having to make tough choices. Of course, creditors are entitled to their money, but it sometimes seems as if they are throwing you an anchor when they could be tossing you a rope.
Debt collection is big business. Companies buy and aggressively pursue payment of delinquent debts, most often defaulted credit card accounts. Encore Capital Group leads the collection industry and last year alone amassed $1.2 billion from consumers. More than half of that amount was through the courts, which typically sees Encore file through its subsidiary, Midland Funding, LLC. In many low-level courts across the country, debt collectors bring more lawsuits than any other type of plaintiff. When they win, they often seek to enforce their judgments by seizing funds from a debtor’s bank accounts and by wage garnishment.
In Kentucky and 20 other states, creditors and collectors are allowed to seize 25 percent of a debtor’s wages. Many also allow a high interest rate to be charged, even after judgment, and make the debtor responsible for the attorneys’ fees. This is especially insulting because debtors struggling with financial problems and who are unfamiliar with the court system rarely retain legal counsel, whereas creditors and collectors are almost always represented by a lawyer. Furthermore, many debtors choose not to question the facts of the filing, making judgment by default the most common outcome of a debt collection lawsuit.
Seizing funds imposes yet another financial hardship on individuals who are already struggling. A study of 13 million employees by payroll services provider ADP found that wage seizures were most common among middle-aged, blue-collar workers, and lower-income employees. More than one in ten workers between the ages of 35 and 44 has had their wages garnished, and almost five percent of those earning between $25,000 and $40,000 per year had their wages garnished to pay down consumer debts.
Debt collection agencies aren’t the only ones turning to the courts. Some public and nonprofit hospitals have seized patients’ wages after successful lawsuits, even from patients who were eligible for financial assistance. During the recession of 2008 to 2010, Capital One bank sued more than half a million customers per year nationally and still files considerably more collection suits than any other national bank.
While new rules for debt collection are being considered by the federal Consumer Financial Protection Bureau, it is proving difficult to know where to focus. Data is limited, and the industry is far from transparent. In fact, some of the larger collection companies have stopped disclosing the number of suits filed as well as any details on their debt-selling practices.
The Kentucky debt collection attorneys at Bunch & Brock are familiar with every aspect of debtor and creditor issues. We are a debt relief firm committed to providing each of our clients with personal attention and real solutions to financial troubles. We understand that circumstances exist that can result in financial problems for even the most conscientious of people. If you have overdue debts that have gotten a collector’s attention, we encourage you to contact our office by calling 859-254-5522 or by filling out this online form.