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Older adults struggling with debt collectors, agency says

Debt Collection SliderThe Consumer Financial Protection Bureau released a report Wednesday that said debt collection is a top complaint for older Americans, many of whom say they struggle with debt in retirement.

Some of the debt collection issues older Americans complain about include collectors: hounding about medical debt, attempting to collect on debts of deceased family members, and illegally threatening to garnish federal benefits, according to the report.

“It is increasingly common for older Americans to carry debts into their retirement years, and consumers living on fixed incomes often struggle to pay off these debts,” said bureau Director Richard Cordray. “Older Americans deserve to be treated with the respect they have earned.”

Debt collection is a multi-billion dollar industry with more than 4,500 debt collection firms nationwide. Banks and other original creditors may collect their own debts or hire others to collect debts. Original creditors and other debt owners also may sell their debts to debt buyers. About 30 million Americans had an average of $1,400 under collection in 2013.

Since September 2013, older Americans have submitted more complaints to the bureau about debt collection than any other financial product or service. The agency’s analysis shows one out of three complaints were about debt collection. The debt collection report analyzes about 8,700 complaints made by older consumers to the bureau from July 10, 2013 to Sept. 30, 2014.

Some older consumers say they are unable to afford debt payments especially when they’re retired and live on a small fixed income. They also are concerned that the distress of being harassed by a debt collector aggravates existing medical conditions, endangering their health.

The bureau said recently that older adults with cognitive impairments are vulnerable to harassment and scams, especially when seniors have memory problems or can’t keep track of finances. The report found some of the issues affecting older Americans when it comes to debt collection include:

  • Collectors hounding older Americans about medical debt.
  • Collectors attempting to collect on debts of deceased family members.
  • Collectors illegally threatening to garnish an older American’s federal benefits:

Older consumers couldn’t identify the original source of the underlying debt in about one third of their debt collection complaints. Of the debt they were able to identify, older Americans said 33 percent was from miscellaneous bills such as rent, utility bills, phone bills, and membership fees. Other top sources of the debt were: credit cards, 17 percent; medical debt, 10 percent; and payday loans, 5 percent.

Help for consumers

To help older consumers, the bureau is issuing an advisory highlighting things they can do to help deal with debt collectors:

  • Protect their federal benefits: Consumers need to know that most federal benefits are protected in debt collection. Also, when a consumer receives federal benefits by direct deposit to a checking account, the bank or credit union is required automatically to protect up to two months of these benefits. If the consumer receives benefits on a government issued prepaid card, they usually are protected too.
  • Get more information to identify the debt: Older consumers report that collectors often reject or ignore their attempts to correct instances of mistaken identification. Today’s advisory tells consumers how they can obtain more information to identify the debt. It also includes the CFPB sample letter that consumers can use to find out information about the claims being made against them.
  • Dispute inaccurate debts: Older consumers report that it is difficult to obtain accurate or trustworthy information about alleged debt from collectors. Many consumers complain that they often inform collectors that they do not owe the debt, do not recognize it, or believe the amount that debt collectors demand is wrong. Today’s advisory tells consumers how to dispute the debt. It provides a sample letter to contact the debt collector.
  • Stop the harassment: One of the most common debt collection complaints that the Bureau receives from older consumers is that debt collectors use abusive communication tactics to intimidate, aggravate, or coerce them into making payments. Older consumers complain that debt collectors make successive calls using profanity, condescension, indignation, or rage. Today’s advisory includes a sample letter that consumers can send to request that debt collectors cease collection communications.

The bureau has taken several steps to protect consumers to protect consumers from debt collectors. The bureau’s larger participant rule for debt collection, which became effective on Jan. 2, 2013, gives the bureau supervisory authority over the largest debt collection companies. In addition, in November 2013, the bureau announced it’s considering consumer protection rules for the debt collection market.

Copyright 2014, Rita R. Robison, Consumer Specialist

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