Being in debt is stressful enough. What’s more, consumers who receive collection letters may not know they’re being subject to agencies’ illegal—not to mention threatening—debt collection tactics. Luckily, our writers have spotted a few trends debt collection agencies sometimes use to try to dupe the “least sophisticated consumer.”
Here at ClassAction.org, our NewsWire team has written about tons of class actions filed over allegedly illegal debt collection practices. Many of the unlawful techniques employed by collection agencies, we’ve noticed, show up in debt collection letters. Unfortunately, many consumers may not realize that what they’re reading in a collection letter—or, in some cases, not reading since it was intentionally left out—is a violation of federal law.
But First . . . Introducing the “Least Sophisticated Consumer”
No reason to be offended, gentle reader. By saying “least sophisticated consumer,” we aren’t referencing anyone in particular. Rather, the “least sophisticated consumer”—sometimes similarly called the “unsophisticated consumer”—is a standard outlined by the Fair Debt Collection Practices Act (FDCPA) that lowers the bar, so to speak, when determining whether a debt collector’s practices are deceptive or misleading.
When fighting allegedly deceptive debt collection practices, the least sophisticated consumer tag serves as an umbrella term meant to protect all consumers, especially those who may be uninformed or naïve.
So, What Should I Watch Out for in a Debt Collection Letter?
There are plenty of ways debt collection agencies are believed to be violating the FDCPA every day. Below, we’ve expanded upon a few trends that have come up in the FDCPA class action lawsuits covered by our writers.
1. Saying the forgiveness of a debt needs to be reported to the IRS when that is not the case.
Debt collection agencies will sometimes offer to forgive (read: settle) a consumer’s debt (or a portion of it) for less than the original debt amount. Along with this proposed settlement offer often comes language saying that the forgiveness of debt amounts greater than $600 (or a similar sum) must be reported to the IRS. This is generally untrue. Such language, in fact, could lead the least sophisticated consumer to mistakenly believe that anydebt forgiveness must be reported to the IRS. Under the FDCPA, this could be viewed as a scare tactic meant to intimidate consumers with the threat of having to deal with the IRS.
2. Failing to note that the “amount owed” may actually increase due to the accrual of interest and/or fees.
Debt collectors will sometimes list a debtor’s current balance without clearly stating that that amount may increase due to the accrual of interest and fees. The FDCPA mandates that debt collectors must make it clear if a debt amount could go up due to interest and fees because the least sophisticated consumer could very well be misled into thinking, for example, that his or her debt is entirely paid off when it is actually still increasing.
3. Saying a settlement offer is a “limited time offer” and only valid if the first payment is made by a certain date when there’s actually no time limit in which a debt needs to be settled.
Putting a non-existent time limit on a settlement offer is a fairly common tactic debt collectors use to pressure or intimidate debtors into settling a debt or paying up as soon as possible. The FDCPA says it is unlawful for debt collectors to use any language that indicates they make take action when they have no intent of doing so, as may be the case by putting a phony time limit on a settlement offer.
4. Failing to include mandatory language about disputing the validity of a debt.
Under the FDCPA, a debtor has the right to dispute the validity of his or her debt and demand verification from the collector. If a debt is under dispute, the FDCPA calls for companies to cease all collection activities until it provides written verification of the debt. Our writers have seen instances in which debt collectors will leave this notice out of collection letters, possibly as a means to avoid the cost of obtaining debt verification and sending it to the consumer. Similarly, debt collection companies will fail to inform debtors that requests for the validity of a debt must be made in writing within a typically 30-day window of receipt of the collection letter.
5. Not indicating exactly when a payment period starts.
Debt collectors will often say debtors have to pay a debt within a certain period of time (often within 30 days of receipt of the collection notice). Sometimes, though, collectors fail to say the exact date on which this period starts in violation of the FDCPA.
6. Including any language that contradicts FDCPA-mandated disclosures.
It is illegal for debt collectors to include any language in a letter that contradicts the letter of the law set by the FDCPA. For example, it would be unlawful for a debt collector to tell a debtor that he or she has to respond to a debt immediately in order to avoid future actions, but then say he or she has 30 days to validate the debt.
7. Failing to expressly identify itself as a debt collector.
Although this happens more often when collectors leave debtors phone messages rather than in letters, the FDCPA calls for debt collectors to clearly identify themselves as such.
8. Saying a debt is subject to non-existent fees or late charges.
This is another pressure technique debt collectors may use to intimidate the least sophisticated consumer into paying immediately. It is unlawful for a debt collector to say, for example, that an owed debt is subject to late payment fees when no such charges actually exist.
Have you caught something in a debt collection letter that’s left you scratching your head? Drop us a line in the comments.