Tag Archives: debt collection lawsuits

Study says 1/3 of Americans have at least one debt in collections and the average Oregonian is $60,752 in debt- the 9th highest average in the nation

More than one-third of Americans (35%) have a debt in collections, according to a study recently released by the Urban Institute. That means just about every third person you pass by on the street is dealing with a collection company in regard to a delinquent debt.

Just about one out of every three Oregonians is also dealing with a debt collector. The same study found that 30.5% of Oregonians have a debt in collections, with the amount averaging $5,456. The national average amount of a debt in collections is $5,178. The national average debt is $53,850. The average Oregonian is $60,752 in debt, the ninth highest in the nation. Only 20% of Americans with credit records have no debt at all.

Debt in collections often originates from nonpayment of a bill, including failing to make payments on an outstanding credit card balance, not paying medical or utility bills, or even not paying a parking ticket. After a debt is more than 180 days past due, it is typically placed in collections by the original creditor or sold to a third-party debt buyer. What the report reveals beyond the numbers is the daily financial distress millions of Americans are living under, as well as the degree of that distress.

The collections industry recovers approximately $50 billion annually, mostly from consumers, according to a study published this year by a Federal Reserve branch research group. Thus while everyday Americans may be struggling, the collections industry is booming and cashing in on the situation. Debt collectors are regulated by the federal Fair Debt Collection Practices Act (FDCPA), among other state specific statutes, such as Oregon’s Unlawful Debt Collection Practices Act (UDCPA). The vast majority of the debts being collected by debt collectors can be discharged in bankruptcy. Although filing a bankruptcy here in may not be the best option for everyone, at least consulting with a local bankruptcy lawyer in your area is probably a very good idea so that you can base your decision on the facts.  Also, if you feel that your rights may have been violated under the Fair Debt Collections Practices Act (FDCPA), you should also consult with a local consumer rights lawyer in your area.

Seventh Circuit further limits the collection of time-barred consumer debts

A recent decision by the Seventh Circuit in the consolidated appeals of McMahon v. LVNV Funding, LLC, and Delgado v. Capital Management Services, L.P., suggests that debt collectors need to take heed when collecting on debts for which the limitations period related to the underlying claim has expired. In both cases, the consumer plaintiffs had alleged that specific collection attempts violated various provisions of the Fair Debt Collection Practices Act  (“FDCPA”) (15 U.S.C. § 1692, et seq.). In McMahon, the dunning letter sent to the consumer was an attempt to collect on an alleged utility debt that originated about 14 years prior. In Delgado , the alleged debt was about eight years old. In both cases, the applicable limitations period had long since passed. Perhaps the most notable fact regarding both collection letters is that neither of the letters directly threatened litigation on the time-barred debts,  as previous case law already supports FDCPA violations for such conduct (e.g., Herkert v. MRC Receivables Corp., 655 F. Supp. 2D 870 (N.D. Ill 2009)).

However, favorably citing a Federal Trade Commission Report titled A Broken System: Protecting Consumers In Debt Collection Litigation and Arbitration, the Court reasoned that it’s likely that many consumers do not understand their rights (not to be sued) with regard to time-barred debts, and therefore may be misled into believing that if they do not pay the settlement amount that the debt collector will then initiate litigation. The Court also addressed concerns that in the absence of any explanation that the limitations period has expired, unsophisticated consumers could be coaxed into making even a small payment on the debt, unaware that such a payment may restart the limitations period pursuant to state law. This holding by the Seventh Circuit decision stands in conflict with previous sister circuit court decisions, by the Third Circuit in Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3rd Cir., 2011) and by the Eight Circuit in Freyermuth v. Credit Bureau Services, 248 F.3d 767 (8th Cir., 2001), and is likely to cause some ripples throughout the debt collection industry.