Debt collector scams: new lows to take your money

The Wall Street Journal reports on a new movement in collection agencies to get people to pay for debts they do not owe!  This is not a case of the collection agency having bad data, a common problem.  In this case their data is usually good.  They know that money was owed by someone who died; the deceased did not leave enough money in their estate to pay the debt; and the person they are dunning has no legal obligation to pay it.

Until recently that would have been the end of it (and medical creditors are still letting these debts go).  But now, a subset of collection agencies has offered creditors (usually credit card companies) the chance to recover something from the relatives of the deceased debtor, even though they know that relatives have no legal obligation to pay unless they had cosigned on the account.

How do they convince people to pay these debts they do not owe? One trick is to lie and tell the wife, husband, son or daughter of the deceased that they are responsible for their loved one’s debt.  Many people, not knowing any better and often still in grief, send a check.  Often it is a check they cannot afford to send.

Another technique is harassment, constant calling, which often exceed limits set by the Fair Debt Collection Practices Act.  (For more on FDCPA see our main article on Fair Debt Collection Practices.

A third tactic they use is to play on emotions.  The collector admits that the relative has no obligation to pay, but plays on their feelings for their loved one.  As one victim put it, she paid her husband’s bill because she “…didn’t want his name dragged through the mud like some kind of deadbeat.”

Seniors carry more unsecured debt these days.  According to one survey, people over 75, carried an average of $7,200 in credit card debt in 2010, up from three times from 2008.

What to do if this happens to you:  The rule is that if your name is not on the debt, then the deceased’s estate is responsible for paying.  If the debt is secured (like a mortgage or an auto loan) the creditor can repossess that. If there is any money in the estate then the creditor (usually a credit card or a hospital) can file in court for a share of that, but money left to relatives is usually unavailable for debts.

If you are a relative and they come after you, then you should immediately send them a letter like the one shown here Debt Collection Cease and Desist Letter , by registered mail, return receipt requested, with the following last sentence: “I do not owe this debt and you know it.  Any further contact by you will constitute harassment.”

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