The debt buying industry, primarily out-of-state companies, threatens and deceives consumers to collect on debts they know are inaccurate. LDs 1199 and 1242 will put in place needed reforms to strengthen Maine’s consumer code to protect Mainers from these abusive and illegal practices.
L.D. 1199 – An Act To Promote Fiscal Responsibility in the Purchasing of Debt
L.D. 1242 – An Act To Prevent Abusive Debt Collection Tactics by Debt Buyers
Senator Rodney Whittemore, Representative Mark Lawrence, members of the Joint Standing Committee on Insurance and Financial Services, good afternoon. My name is Garrett Martin, Executive Director of the Maine Center for Economic Policy and I am here today to support LDs 1242 and 1199 that seek to curb abusive debt buying practices in Maine.
Debt buyers purchase debt that others have written off. They buy this debt for pennies on the dollar, so every old debt they can collect is hugely profitable for them. They have incentive to use inappropriate practices to collect this debt and some do just that. The worst of the debt collectors are abusive, exploitive, and use deceptive tactics to collect bad debts.[1] They hire debt collectors or attorneys to force consumers to pay up, often by suing them in court and getting their wages garnished even on debt the consumer doesn’t even owe. They robo-sign affidavits, not even checking to see if they have the right person, and they illegally sue residents for time-barred debt.
According to a study by the Center for Responsible Lending, based on law suits that had been filed in Maine courts in 2015, just one out-of-state debt buyer stood to drain $7 million from 91,000 Mainers.[2]
The older the debt, the less accurate the information about it or its borrower is likely to be. Debt buyers frequently get only a list of names on a spreadsheet. Sometimes, they have the right name, but they’ve targeted the wrong person who happens to have the same name. The unscrupulous debt buyers don’t bother to determine if they have found the right person or if the person still owes the debt. They frequently refuse to honor payment plans negotiated with the original lender. Most egregious of all, they trick consumers into reactivating debt already extinguished under Maine law.
Unscrupulous debt buyers prey particularly on the elderly and veterans and our deployed military personnel. The federal Consumer Financial Protection Bureau reports that seniors complain most about debt collectors’ tactics on debt they do not owe, including using abusive language, threatening arrest, and attempting to collect debts of deceased spouses.[3] Active duty service members also cite deceptive tactics including threats to have them reduced in rank or to revoke their security clearance to coerce payment on nonexistent debt.[4] Forty percent of debt collection complaints by service members, veterans, and their families involve attempts to collect debt that is not owed.[5]
The debt buying industry, primarily out-of-state companies, threatens and deceives consumers to collect on debts they know are inaccurate. LDs 1199 and 1242 will put in place needed reforms to strengthen Maine’s consumer code to protect Mainers from these abusive and illegal practices.
Thank you for your time. I am happy to answer any questions you may have.
[1] Consumer Finance Protection Bureau. “CFPB Takes Action Against the Two Largest Debt Buyers for Using Deceptive Tactics to Collect Bad Debts,” Sept 9, 2015. Available at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-the-two-largest-debt-buyers-for-using-deceptive-tactics-to-collect-bad-debts/.
[2] Center for Responsible Lending. “Debt Buyer Lawsuits Expected to Drain Over $7 Million from Mainers, including $1.4 Million through Wage Garnishment,” April 2015. Available at: https://www.mecep.org/wp-content/uploads/2015/04/Analysis_Cost-of-Debt-Buying-in-Maine_Center-for-Responsible-Lending.pdf.
[3] Consumer Finance Protection Bureau: Office for Older Americans. A Snapshot of Debt Collection Complaints Submitted by Older Americans, November 2014. Available at: http://files.consumerfinance.gov/f/201411_cfpb_snapshot_debt-collection-complaints-older-americans.pdf.
[4] Consumer Finance Protection Bureau. “Complaints received from servicemembers, veterans, and their families; A snapshot by the Office of Servicemember Affairs,” March 2014. Available at: http://files.consumerfinance.gov/f/201403_cfpb_snapshot-report_complaints-received-servicemembers.pdf.
[5] Consumer Financial Protection Bureau, Service Member Fact Sheet, November 2014.
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