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Linda LaBeau didn't know her rights as a credit-card holder. She did know she was getting constant calls from a collection agency for a debt she wasn't sure was hers.
Angry, scared and frustrated, she asked The Watchdog several smart questions. We found some surprising answers. Turns out consumers have more rights than most of us know.
Pesky Collectors
Here's her problem:
Earlier this year, LaBeau, of Fort Worth, Texas, was the victim of credit-card identity theft. So she was rightfully paranoid when debt collectors started calling and telling her she owed US$4,000 on her Capital One credit card.
Because of a snafu regarding a change of address, she hadn't received credit-card statements -- or late notices -- in months, and she had lost track of her bills (a mistake she now acknowledges). She didn't remember the $4,000 debt and figured it was a remnant of her identity-theft problem, since that was the amount rung up on her stolen cards.
She called Capital One several times asking for back statements. Every time, she recalls, she was told the statements would come. However, none ever did. (Capital One records show she did call several times.)
Meanwhile, NCO Financial Systems, the collection agency, began calling her many times a day, LaBeau said. She explained the situation (she was willing to pay, but she needed to know what the charges were for), but the calls wouldn't stop. She pleaded for more information, but NCO representatives wouldn't help her, she says.
NCO's spokesperson did not return my calls.
Last week, five months after LaBeau first asked Capital One for her credit statements, they arrived. She recognized the $4,000 debt as hers, but how was she supposed to get NCO to stop calling her? What would it take for Capital One to, in the words of spokesperson Pam Girardo, "make her whole?"
Before I share the outcome, let's go over LaBeau's excellent questions.
Legal Options
What should she have done?
Although she called and e-mailed Capital One, Fort Worth lawyer Jerry Jarzombek says she should have sent a letter to the collection agency by certified mail, keeping a copy for her files. Under federal law, a collection agency must stop calling a person for 30 days when a consumer sends a letter disputing the debt. The collector can file a lawsuit against the debtor, but the calls are supposed to stop. If, as happened in LaBeau's case, a financial statement proving the debt is sent to the consumer, the collector is allowed to call again.
What happens if the calls don't stop?
LaBeau says she got several calls every day from NCO. Under law, collectors are not allowed to repeatedly use the phone to annoy a consumer. If they do, a consumer can sue a collection agency for harassment. "Eight calls in a day are ridiculous," Jarzombek says. "If you made contact once, you should be done."
How do you prove that you are being harassed?
Jarzombek, who has sued NCO several times, suggests taping the phone calls for use as evidence in a lawsuit. Such recording is legal under Texas law, he says. When a collection company loses such a lawsuit, it often has to pay attorney fees for the winner.
What laws regulate this?
Federal laws are the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. In Texas, it's the Texas Finance Code.
Know Your Rights
Why don't more people know their rights?
Debts are not something you talk about at work or with your friends. That's why more people don't share information about legal protections, Jarzombek says.
Has NCO had legal problems?
In 2004, NCO had to pay $1.5 million to settle Federal Trade Commission charges that it violated federal law by reporting inaccurate information about consumers to credit bureaus. NCO also reached a nonpaying settlement with the Securities and Exchange Commission in 2005 in which it agreed to cease certain debt-collection activities.
NCO paid Pennsylvania $300,000 in 2006, and the company agreed to comply with state consumer protection laws. The Texas Attorney General's Office tells me that it has received 165 complaints against NCO in the past two years.
How can consumers keep inaccurate information from being added to their credit files?
File complaints with the credit-card company, the collection agency, credit bureaus and government agencies. If all else fails, sue.
Keep Better Records
So how did LaBeau's case end up?
She filed complaints with regulatory agencies. I contacted Capital One on her behalf. After investigating, spokesperson Girardo promised to make sure LaBeau's credit history is cleaned up and, as a courtesy, waived all penalties and late fees.
LaBeau will pay the debt and has learned a lot.
"I would like more consumers to push back on the tactics used by collections agencies," she says. "I thought I was acting as a responsible credit-card holder by contacting Capital One."
She also says she will keep better track of her bills.
The Capital One spokesperson says: "When a month goes by and no statement arrives, you need to call. Don't wait. Call right away."
She adds, "Our error was we did not send her statements to her right away, and we apologize for that."
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