The economic recovery may be gaining traction, but not everyone’s yet feeling the benefit. Many are still recovering financially from an extended period of unemployment, or are finding themselves continuing to struggle with shorter working hours or stagnant wages. Small wonder then that the Consumer Federation of America’s seventh annual savings survey, published in February, revealed more than one in three Americans have no rainy-day fund to see them through even a mini-crisis, such as unexpected car repairs or a doctor visit.

With so many in such precarious circumstances, it’s perhaps surprising that relatively few are failing to keep on top of credit card and other debt. When TransUnion, one of the big three credit bureaus, unveiled its Credit Risk Index on March 4, it revealed auto loan and credit card delinquencies (30-plus days past due) close to their all-time lows. Default rates are also very small and dropping, with the S&P/Experian Consumer Credit Default Indices showing them down in February when compared with both the previous month and February 2013. The most recent default rate for credit card debt was 2.83 percent, “a new historic low,” in the words of Experian’s press release.

When things go wrong

All those data are genuinely excellent news. The trouble is, when you live in a country of 300-plus million people even tiny percentages mean misery for many. And, of course, a whole lot of Americans are still dealing with historical unpaid debts, often dating back to the credit crunch and subsequent recession. In fact, federal regulator the Consumer Financial Protection Bureau (CFPB) revealed on March 24 that 30 million Americans currently have accounts in collection. That’s 14 percent of all adults, and, on average, each of them owes $1,400.

Those numbers were gleaned from a 64-page CFPB report published that day, and those numbers were far from being the most depressing contained within it. In particular, consumer complaints to federal agencies concerning debt collections have shot up over the last 14 years, reaching 204,644 in 2013, compared with 13,950 in 2000. The bureau says these are now its No. 1 type of complaint.

Rogue collectors

It was only in July 2013 that the CFPB took over from the Federal Trade Commission the task of fielding such complaints. The bureau breaks down the ones it received during the rest of that year into three main categories:

1. Wrongful pursuits. More than one in three complaints concerned collectors pursuing debts the consumer denied owing. Some say the debt was never theirs, some that it had already been paid, some that it had been discharged in bankruptcy, and some that it was a result of identity theft.
2. Aggressive tactics. Complainants claimed collectors hounded them through unreasonably frequent phone calls, or called them at work, or used obscene, abusive or profane language.
3. Threats and fear tactics. As many as 14 percent of complaints alleged collectors were threatening illegal actions, such the arrest and imprisonment of debtors — something that can happen in only the most exceptional circumstances.

ACA International, which claims to be the largest trade group for the third-party debt collection industry, responded to the bureau’s report with detailed criticisms, with CEO Pat Morris saying “the CFPB’s report offers helpful perspective but isn’t valuable for setting public policy.”

“As important as these raw data are, it seeks to justify the CFPB’s existence but falls short in looking at the underlying causes that better explain this information,” Morris observed.

Human cost

A few days after the bureau’s report was published, U.S. News & World Report ran an article on the topic that contained stories detailing the human impact of bad collection practices. These included:

1. A woman who was forced to move into a nursing home, partly to escape collectors’ harassing calls. She had early-onset dementia, and the debt was owed by her ex-husband.
2. An Illinoisan who narrowly escaped having her bank account frozen. That was in spite of it containing only the public funds she received for caring for four foster kids, all of whom had severe disabilities. The judgment concerning her debt had been vacated years before.
3. An elderly woman who became extremely distressed when she was hounded over a debt owed by her ex-husband. They’d been divorced for more than three decades.

As the article suggested, all too many (though by no means all) debt collectors use a shotgun approach, harassing consumers and scattering threats in the hope that some will be cowed into paying, regardless of whether they actually owe the money claimed.

Don’t be a victim

Many of the practices described above — and some others — are already illegal under the Fair Debt Collection Practices Act (FDCPA) and other legislation. But, because they remain so widespread, the CFPB has signaled that it plans soon to write more restrictive rules.

In the meantime, you can, if you need to, take action to protect yourself:

1. Read up on your rights. The NOLO.com legal website has a whole section on illegal collection practices, and the remedies available to you if you suffer them
2. The CFPB has drafted some standard letters to help you respond appropriately to approaches by collectors. You can download them from its website.

If you legitimately owe money, you are under a moral and legal obligation to repay it. And most collectors are decent people who are more than willing to work with you to help you clear your debt over a period through affordable installments. But none of this means you should put up with harassment or threats if you’re unlucky enough to encounter a rogue collection agency or employee.

Fight back. If you build up sufficient proof of illegal behavior, the threat of litigation might just see the collector or creditor reduce or forgive your debt. You could even sue, and receive cash. The worst sort of collection agency often focuses on soft targets. Don’t be one.

Published 04/07/14