Monday, March 16, 2009

On this date in 1959...

March 15, 1959:
An 11-year-old girl living in Miami, Fla., sent her savings of $61 to President Dwight Eisenhower to be used to pay down the rising national debt. The fifth-grader had been saving for a horse. The debt had reached $285,578,690, not including another $422.6 million not subject to statutory limit.

Complaints pile up against debt collectors

The Atlanta Journal-Constitution
Sunday March 15, 2009

Consumers complain that a Marietta debt collection firm uses deceit and abusive tactics to collect money, even when it isn’t owed, records show.

Enough complained that the Georgia Governor’s Office of Consumer Affairs began investigating last fall. It ordered Frederick J. Hanna & Associates to answer questions about collection practices, consumer disputes and what it does to ensure the validity of debts.

But for three months the state’s top consumer watchdog agency and the debt collector have been in a standoff.

Frederick J. Hanna & Associates says its tactics are none of the state agency’s business. Because it’s a law firm, the debt collector contends it is outside the consumer office’s jurisdiction. It refuses to answer the agency’s questions.

“We don’t feel like they’re entitled to anything. Period,” Frederick Hanna said. He said his firm gets 50,000 new debt files each month and its collection methods are legitimate.

The consumer office says it has a right to investigate whether the firm’s tactics are breaking state law. “If we perceive an infraction of the law, we don’t believe your status as a law firm will protect you,” said Bill Cloud, a spokesman for the consumer office.

A hearing is scheduled March 30 in Cobb County Superior Court and the outcome could have a significant impact on thousands of Georgia consumers targeted by debt collectors — especially those who don’t owe money.

Here and across the nation, consumers complained more about debt collectors than any other industry in 2008, according to new data from the Federal Trade Commission’s Consumer Sentinel Network.

The network, used by law enforcement, tracks complaints to the FTC, as well as to groups such as the Better Business Bureau, FBI, U.S. Postal Inspection Service, Social Security Administration and the National Consumers League.

Last month the FTC issued a report saying the debt collection legal system needs reform and the 1977 Fair Debt Collection Practices Act needs to be modernized to reflect changes in technology, debt and the collection industry.

While the FTC said timely payment of debts is important, it said the law needs changes to better ensure that collectors are going after the right people for the right amounts of money. The law also needs to mandate that collectors give consumers better information about their legal rights.

Complaints about debt collectors are on the rise and some of the tactics firms use are already illegal, Cloud said.

“A lot of them are buying up ‘zombie debt.’ It’s old debt you cannot collect anymore by normal means,” Cloud said. “It’s essentially debt renewal. To get you back on the hook they try to intimidate and try to berate you.”

Zombie debt, like the name implies, is debt — legitimate or not — that refuses to die. It may be debt that resulted from identity theft years ago that the original creditor wrote off. It may be a legitimate debt that is several years old, was already paid off or has been legally erased by bankruptcy. The debt gains new life when sold to a collection agency for pennies on the dollar.

In November, the state consumer office served an investigative demand notice, similar to a subpoena, on Frederick J. Hanna & Associates. It asked for documents about the firm’s collection practices, including those involving zombie debts. Officials with the consumer office declined to give details about the complaints they have received about the firm, citing the ongoing investigation.

The firm has an “F” rating with the BBB because of its complaint history, including failing to respond to consumer concerns, according to BBB records.

State officials are investigating potential violations of Georgia’s Fair Business Practices Act, according to the notice, including allegations the firm engaged in abusive or oppressive tactics prohibited under state and federal laws and allegations the firm used misleading and deceptive methods. The notice does not provide details or examples.

Hanna said Friday that if the consumer office wants to review a few specific files, he’d allow it. But he said he has hundreds of thousands of files and it is unreasonable to provide them all, as has been requested.

Until recently, it was unclear whether the state Fair Business Practices Act could be applied to debt collectors. In 2007, the Georgia Court of Appeals held that collection of a debt is a consumer transaction covered by the law.

Frederick J. Hanna & Associates, in documents filed in Cobb County Superior Court, says the consumer office is asking for an unreasonable amount of information. But beyond that, the debt collection law firm contends that the consumer office has no jurisdiction over the practice of law and therefore no jurisdiction over its activities. The consumer office is seeking an order from the court to force the firm to comply with its demand for documents and information.

State consumer officials have opened a similar investigation of Mann Bracken, a national debt collection law firm with an office in Atlanta. Mann Bracken also contends the consumer office doesn’t have jurisdiction, according to Fulton County court records. Lawyer conduct is regulated only by the State Bar and the Supreme Court of Georgia, the firm said in documents filed in court.

Hanna said Spotlight should not be focusing on debt collection firms. The problem is the debtors and the amount they owe, he said, adding that consumers should try to work with people like him.

Cloud warned that consumers should be careful about anything they say to a debt collector. Insist the firm send you written proof you owe the money, he said.

“If this is an old debt and you do not believe you owe this money, do not in any way, shape or form reaffirm this debt,” Cloud said. “They are probably recording you.”



The federal Fair Debt Collection Practices Act prohibits debt collectors from using abusive or deceptive practices, such as threats of harm, harassing phone calls or misrepresenting what you owe. Here are some tips from the Federal Trade Commission:

Proof of debt: All collectors must send you a “validation notice” within five days after they first contact you. It must include how much you owe and what you need to do if you don’t think you owe the money.

Managing calls: Collectors can’t call you at inconvenient times, such as before 8 a.m. or after 9 p.m., unless you agree to it. They also can’t call you at work if you’ve told them that you are not allowed to take personal calls there.

Calls limited to others: Collectors are generally prohibited from discussing your debt with anyone besides you, your spouse or your attorney. They can only contact other people to find out your address, your home phone number and where you work.

For more information about your rights, go to:



David Vallin of Canton was one of the 4,430 Georgia consumers who complained about debt collectors last year to agencies in the FTC’s Consumer Sentinel Network.

Vallin said a firm with a Michigan address began calling and sending letters last fall, ordering him to pay $322 for cellphone bills unpaid since 2006.

Vallin assumed T-Mobile, where he’d once had an account, had simply made a mistake. “I knew I’d paid it off,” he said.

But after a few calls, Vallin said it was clear the bills weren’t his. They were for two separate accounts and five phone lines. But his name and Social Security number were on the accounts.

“I have no idea how they got my information,” said Vallin, 23, who complained to the BBB last fall and then turned to a private identity theft protection firm to help him freeze his credit against further fraud and sort out the debt collection mess.

Vallin said he learned last week that the matter is nearly resolved; he said the ID theft protection firm told him that T-Mobile has agreed that the accounts were fraudulent and is calling off the debt collector.

T-Mobile officials said they can’t comment on individual accounts. The company issued a statement saying such situations are rare and that the company has safeguards to prevent identity thieves from opening accounts.

Georgians filed 10,748 complaints last year about various types of identity theft — many involving the fraudulent opening of accounts or use of credit. Nearly 1,200 complaints involved phone or utilities fraud; 1,900 involved credit card fraud, according to the FTC’s data.

“Identity theft, that’s our No. 1 consumer education item,” said Fred Elsberry Jr., president of the BBB serving metro Atlanta, Athens and northeast Georgia.

You can find help at the Governor’s Office of Consumer Affairs’ detailed help guide. The FTC’s tips are at



Whether it’s an abusive debt collector, a problem with identity theft or one of the many scams consumers encounter each year, these groups can help:

Governor’s Office of Consumer Affairs (Georgia): 1-800-436-7442.

Better Business Bureau (Georgia): 404-766-0875,

Federal Trade Commission:



Georgia residents filed 27,470 complaints in 2008 with government and nonprofit watchdog agencies about fraud and other consumer issues. Here are the top categories:

Issue type Complaints

Debt collectors: 4,430

Internet services (providers, Web hosts) 1,455

Credit bureaus, report issues: 1,439

Shop-at-home, catalog sales: 1,239

Television, electronic media (reception, installation, billing, etc.): 1,229

Foreign money offers, counterfeit check scams: 1,017

Banks, lenders (predatory lending, overdraft charges, customer service, etc.): 911

Prizes, sweepstakes, lotteries: 861

Telecom equipment and mobile services: 844

Business opportunities, work-at-home, employment agencies: 712

Source: FTC Consumer Sentinel Network,

National Debt Clock