Can federal agency go after bill collector?

The case may signal how the regulator could go after other companies

A U.S. financial regulator has filed a lawsuit against a major bill collector.

The U.S. Consumer Financial Protection Bureau has sued Hanna & Associates in Georgia federal court. The claim relates to over 350,000 credit card collections and how the firm is going forward with these collections.

Some of the consumers “may owe nothing or owed less than was claimed” in collections handled by Marietta, Ga.-based Frederick J. Hanna & Associates, according to allegations in a report from The Wall Street Journal.

The firm says it provides “banks and creditors with a law firm exclusively dedicated to creditors’ rights and recoveries.”

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Also, the case may signal how the regulator may go after other companies that try to collect debt, possibly on out-of-date claims, those that have the wrong amount, do not have supporting documents, or are overlapping with other claims, The Journal said.

Often, consumers fail to show up in court, and may find it difficult to reverse judgments. It could lead to a consumer getting wages attached, bank accounts frozen or a lien placed on their property.

"We have successfully defended ourselves against these types of claims before," Joseph Cooling, managing partner at Hanna & Associates, told The Journal. The company maintains its innocence.

In addition, Joann Needleman, president of the National Association of Retail Collection Attorneys, questioned why the federal government is even getting involved. "It has always been up to the states to regulate their licensed attorneys," Needleman was quoted by The Journal.

Some 77 million Americans have debt that currently is in collections, according to the Urban Institute. The think-tank recently announced how 35 percent of adults with a credit file have debt in collections. They owe an average of $5,178. Debt in collections relates to non-mortgages. It will include money owed on credit card balances, for healthcare or to a utility company. In addition, it is over 180 days past due. Some 5.3 percent of consumers with a credit file have a report of past due debt, which means they are between 30 and 180 days late on a nonmortgage payment, the Urban Institute said. Such debt can hurt consumers’ ability to get a loan or sometimes even impact their ability to get a job.

Meanwhile, the U.S. Consumer Financial Protection Bureau is also trying reduce the over $30 billion U.S. banks receive in overdraft fees a year.

“Despite recent regulatory and industry changes, overdrafts continue to impose heavy costs on consumers who have low account balances and no cushion for error,” Richard Cordray, the bureau’s director, said in a statement sent to Bloomberg News. “Overdraft fees should not be ‘gotchas’ when people use their debit cards.” Last year, banks and credit unions earned $31.9 billion in overdraft fees, according to data from Moebs Services. 

Contributing Author

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Ed Silverstein

Ed Silverstein is a veteran writer and editor for magazines, websites and newspapers. A graduate of Harvard's Kennedy School of Government, he has won several...

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