N.J. Debt-Collection Act Nearer To Reality

by Jonathan Summers

The first call came in late April. Megan Duffy, a 21-year-old college student, picked up the phone at her parents’ home in Belmar, N.J., and heard the voice of a debt collector. With just one credit card and a few hospital bills to pay off, she wasn’t daunted. For Duffy and other New Jersey residents who feel hounded by debt collectors, alleviation could be on the way. An Assembly committee on June 4 OK’d the New Jersey Fair Debt Collection Practices Act, which would expand a 1977 federal law and give victims of harassment access to help at the state level. “New Jersey’s long overdue to come up with a state statute,” Burzichelli said. The bill would more strictly regulate the communication debt collectors can have with debtors, and set harsher penalties on violators.

Supporters of the bill say abusive debt-collection practices, for example repeated phone calls, falsifications, calls at work, calls to employers and family members – is unnecessary and need to be dealt with at the state level. Under the proposed law, debt collectors could not threaten criminal proceedings or other legal action unless they intend to follow through. “It’s obvious that I’ve never talked to a debt collector”. . . . The caller, she said, badgered her to have a friend or family member pay her debt. The bill imposes a maximum penalty of $10,000 for the first offense and a maximum of $20,000 for the second, a provision consumer-law experts say would make the proposed legislation one of the strictest state laws in the nation.

Fair-practice laws on debt collection vary from state to state. According to David Szuchman, director of the New Jersey Division of Consumer Affairs, the proposed legislation is desperately needed in New Jersey. At the June 4 Assembly Consumer Affairs Committee hearing, Szuchman said 787 debt-collection complaints had come through the division last year, 368 for alleged harassment. In 2007, the division received 753 complaints. “New Jersey’s consumers deserve better. Nationally, complaints about the behavior of debt collectors have spiked with the recession.

Sergei Lemberg, who specializes in consumer law at the Connecticut firm Lemberg & Associates, said the current number of debt-collector cases was “tremendous.” “There’s a fresh group of people who have never had problems with credit before,” Richter said. “All of a sudden, the debt collectors know those are good targets for them to harass and abuse.” In its 2009 report to Congress, the FTC noted a growing number of national consumer complaints about in-house and third-party debt collectors from 2007 to 2008.

In 2008, 34.7 percent of all complaints were claims of harassment by collectors, compared with 19.7 percent in 2007. Debt-collection agencies say enough is being done at the federal level. In addition to over regulating agencies, Gambarella said, the bill has several problematic parts, such as its provision for punitive damages awarded to victimized debtors. Other critics, including the New Jersey Business and Industry Association, say the law would make it more difficult for a company to follow existing regulations, as laws vary from state to state.

Lemberg said his firm handled 50 to 100 debt-collection cases a month. The most common problems clients come to him with are debt collectors who threaten arrest or legal action, make repeated calls at work, call family members and employers, or misrepresent themselves on the phone. Debt collectors often threaten to send a law official to a debtor’s home, for example, which Lemberg said is not only a complete bluff, as someone cannot be arrested for not paying a private debt, but also illegal. “Most people are completely and entirely clueless,” Lemberg said. Burzichelli said his bill was in no way intended to eradicate or forgive a debt.

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