Technology

Debt Buyers*, Unlicensed and Unregulated, Thrive in NYC

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In this economic crisis, there’s no shortage of people who thrive by taking advantage of other people’s misfortunes.

At a City Council hearing held last Wednesday, lawmakers and citizens lambasted the unlicensed debt collection agencies that collectively filed 300,000 collection cases in New York City Civil Court last year (The total number of cases filed for the rest of the country was only 320,000, says the peppy city councilman from Stuyvesant Town, Dan Garodnick). Those debt collectors, many of which have sprung up since the Wall Street collapse in the fall, obtained $800 million in judgments in the city last year.

Not only does NYC have as many debt collection lawsuits as the rest of the country put together, according to a study by the Urban Justice Center, more than 40 percent of these judgments have no real legal basis.

New York, unlike many other states, does not require debt collection agencies to be licensed (Garodnick introduced a bill last week to license them). Without any oversight, these agencies
have been increasingly employing illegal tactics to pressure consumers to settle their debts. According to people who testified before the council, the collection agents call late at night,
harass them at work during the day, threaten to evict them from their houses, and even threaten to have them deported (That’s all illegal under the Fair Debt Collection Practices Act).

According to the report, about 30,000 people last year were never served papers before the court obtained judgments against them. In many cases, their banks accounts were frozen without them even knowing that they were in debt.

*UPDATE/CORRECTION: Debt collection is not unregulated in New
York, and in fact, New
York has some of the strongest consumer debt
protection laws in the country. What is unregulated is a new category of
debt collector – the debt buyer. Debt buyers are companies or individuals
who purchase debt cheaply and then attempt to collect it. A debt buyer does not have
to have a license to purchase debt
from the retailer. This is what Garodnick’s bill would do – it would
require the debt buyers have to have a license before they can purchase any
debt.

[Photo from website of Dan Garodnick.]