By Audrey Dutton
Idaho Statesman
BOISE, Idaho (AP) — Douglas Ackley thought he was making good on his debts. Then he got sucked into what became a two-year battle in state and federal courts.
At 32, the Boise State University student and Boise VA Medical Center employee had gotten in over his head.
He owed $12,000 on four credit cards. So he cut a deal with a Maryland debt-consolidation firm: The firm would settle with the credit-card companies, and he would make payments for three or four years, emerging debt-free.
“I found out after the fact that they hadn’t settled with anybody,” Ackley said. Instead, his debt had been sold off to a debt buyer.
So Ackley became one of the fraction of Idahoans who decide to fight lawsuits brought by debt buyers — lawsuits that are part of a “system for resolving consumer debt collection disputes (that) is broken,” according to the Federal Trade Commission.
Debt buyers are companies that make their money from ancient bills. They pay pennies on the dollar for a chance to collect on debt that original creditors have given up on. Such debt gets sold in giant packages worth thousands to millions of dollars.
Court records, interviews and complaints to state regulators paint a picture of a thriving debt-buyer industry that files thousands of lawsuits each year and is rarely challenged by debtors.
Credit-card debt and the recession have fed the growth of Idaho’s debt-purchasing business over the past decade. Five debt buyers were licensed to work in Idaho in 2008. By 2009, there were 44. Last week, there were 99.
They buy uncollected debts from retailers, utilities, telecom companies and credit-card companies that would rather settle for pocket change than nothing at all.
Nationwide, three of the largest buyers bought more than $77 billion of old, hard-to-collect accounts between 1996 and 2006, paying $1.8 billion, according to DBA International, the debt buyers’ association.
Three major debt buyers that collect in Idaho — Midland Funding, a subsidiary of Encore Capital Group of California; Asset Acceptance Capital Corp. of Michigan; and Portfolio Recovery Associates of
Virginia — filed hundreds of lawsuits in Ada County last year.
The companies routinely sue debtors for the balance due plus interest plus attorneys’ fees.
Midland Funding got $1.52 million, Asset Acceptance got more than $300,000, and Portfolio got $1.14 million in legal judgments just in Ada County in the past year, according to a review of court records by the Idaho Statesman.
The vast majority of those lawsuits went unchallenged, giving the debt buyer a near-automatic victory in court and a shot at garnishing wages on judgments of about $600 to about $31,000.
Some debtors know they owe the money and don’t want to fight it, or they put it behind them by paying at least some in a settlement.
Idahoans also rarely take debt collectors to court under the Fair Debt Collection Practices Act, the law all collectors must follow. It’s not easy for debtors to win such challenges, says Robert Hobbs, a deputy director of the National Consumer Law Center.
“The claim that people win against debt buyers is where it’s the wrong person, or they have filed a sworn statement in court that is clearly erroneous,” Hobbs said.
In Ackley’s case, the Maryland firm took Ackley’s payments for a few years while his debt got re-packaged and sold off.
Ackley said he learned he’d been played when someone representing debt buyer Portfolio Recovery Associates showed up at his girlfriend’s house. The company’s lawyer “said if I didn’t pay them $1,500 immediately, they would take me to court, and I would (also then) have to pay $150 to $200 an hour in legal fees,” Ackley said.
For the next couple of days, Ackley stressed about what to do.
“I was really considering trying to come up with the money” to pay up front, he said.
Then he heard from Oscar Klaas, an attorney for Brady Law in Boise. Klaas had seen Ackley’s name as a defendant while scouting for promising cases to represent. Klaas said he took a shine to consumer
protection while studying law in Minnesota. When he can, he said, he reaches out to people like Ackley who are tangled up in debt-collection lawsuits.
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