11/17/2015 – Bad Debt Collectors and Their Prey (The New York Times)

Nov 17, 2015 No Comments by

All states have laws that are intended to prevent debt collectors from driving families into destitution. But those laws, some of which date to the distant past, have been rendered ineffective by debt collectors using new and devious ways to win court judgments that allow them to seize debtors’ paychecks or bank accounts.

Last week, a network of debt collectors agreed to pay $59 million to settle a class-action suit brought on behalf of people in New York, many of whom had their paychecks garnished or their bank accounts frozen. The lawsuit, filed in 2009, accused the companies of filing false affidavits in court claiming that they had properly notified people that they were being sued. The plaintiffs charged that after they failed to show up in court, the debt collectors applied for a default judgment, making it possible to get access to the people’s bank accounts and paychecks.

The National Consumer Law Center, a policy and advocacy group, has recommended that states adopt a model law that, among other things, would prevent debt collectors from seizing so much of a person’s paycheck that they dropped below a certain income floor; allow the debtor to keep a used car of average value; and preserve at least $1,200 in the bank to pay rent, utilities and transportation to work.

Read the full article in The New York Times.

Financial Landing 2015

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