Medical researchers came up with a breakthrough in the 1980s in their quest to cure patients of HIV. They developed the Highly Active Antiretroviral Therapy, which non-scientists called a "drug cocktail." Even though any single medicine was not powerful enough to cure people with HIV, it was discovered that the right cocktail of drugs could be highly effective.
Many U.S. attorneys general are working with each other and with the federal government to employ the same strategy to control and eventually eradicate the scourge that is unethical debt collectors, because just one strategy alone seems not to be enough.
West Virginia Attorney General Darrell McGraw saw how the settlement against a major debt collector in a class-action lawsuit would pay out a lousy ten bucks per victim. Exercising his rights to protect the citizens of West Virginia, McGraw then brought his own suit against the company for using false affidavits when obtaining default judgments against West Virginians and for not including necessary details when suing consumers.
Attorney General McGraw said:
"Many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights."
Minnesota Attorney General Lori Swanson is prosecuting agencies who work with attorneys to scam consumers. Debt-settlement companies align themselves with lawyers so they can use official-looking letterhead to collect fees up-front for promising to help consumers with their overwhelming debts. Then they fail to deliver, leaving the consumers in even-deeper debt. Attorney General Swanson said: "It's particularly galling. Here you're seeing people who have a special privilege -- the privilege to practice law -- abusing consumers who are down on their luck."
Illinois Attorney General Lisa Madigan is going after lawyers who specialize in requesting arrest warrants for consumers behind on their bills. One example is a 53-year-old woman who was stopped for a broken taillight. When the police ran her name, she was handcuffed in front of her kids and hauled away for a $2,200 debt that had turned into a default judgment.
The Wall Street Journal surveyed just nine counties in the U.S. and found more than 5,000 such arrest warrants issued since 2010 for debt-related cases. Attorney General Madigan said: "We can no longer allow debt collectors to pervert the courts."
Texas Attorney General Greg Abbott has gone after multiple debt-collection companies, including one whose employees took the arrest-warrant threat to a whole new level. Their employees claimed to be associated with law-enforcement agencies and the IRS. They would insist that consumers pay their debts or risk facing arrest, prosecution, and imprisonment.
Massachusetts Attorney General Martha Coakley is onto the game some debt collectors play of threatening consumers with legal action while hiding the fact that the debt is "time-barred"; in other words, the debt has passed the statute of limitations for any legal action. Her amended regulations would require that consumers be informed of that fact.
Ohio Attorney General Mike DeWine has banded together with 18 other states to go after NCO Financial, a large debt-collector, for a whole range of violations, including extracting money from consumers for debts they did not owe, and charging excessive interest.
Ohio has a tradition of pursuing debt collectors. As Attorney General in 2010, Richard Cordray investigated two other debt-collection firms, and now he heads the Consumer Financial Protection Bureau. He therefore has first-hand knowledge of the games debt collectors play.
No doubt that is why Director Cordray has already proposed regulations that would involve on-site federal inspection of the top debt collectors representing 63 percent of collections in the U.S.
More bad news is in store for crooked debt collectors. Recently, state and federal officials gathered to announce the $25 billion mortgage-servicing settlement.
Lisa Madigan used that event to reinforce the regulatory cocktail that's being assembled against the worst debt collectors:
"Know that this is neither the beginning nor the end of our work to hold banks and other institutions accountable.... Today's settlement should serve as a warning for financial institutions: there are consequences for engaging in practices that jeopardize the stability of our communities and our economy," she said.