Tuesday, July 29, 2008

Recently, a federal appeals court held that debt collection agencies cannot avoid responsibility for abuses by blaming them on creditors.

In the case of Reichert v. National Credit Systems in the UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT, Judge Mary Schroeder, ruled that the federal Fair Debt Collection Practices Act requires debt collectors to prove that they have used detailed procedures to ensure that they do not take actions that are prohibited by the act, such as harassing consumers, overbilling or making deceptive statements.

"A debt collector is not entitled to just sit back and wait until a creditor makes a mistake and then institute procedures to prevent an occurrence," the court ruled.

The case involved an Arizona consumer, Robert Reichert, who was contacted by a debt collector about an outstanding bill from his old apartment complex. The debt collector, National Credit Systems Inc., had tacked on charges for "attorney's fees," but couldn't explain where the charges came from. The collection agency claimed that it had overlooked the error because the landlord-creditor had always provided accurate information in the past. The court rejected that defense, holding that debt collectors must show detailed preventive procedures to escape liability for their actions.

"The court's ruling will compel debt collectors to police themselves more effectively," said Deepak Gupta, an attorney for Public Citizen who argued the case. "The ruling is very significant at a time in which increasing numbers of Americans are being contacted by debt collectors and abuses are on the rise."

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