ECLECTIC RANT: Collection Agency Picked On the Wrong Lou Correa

By Ralph E. Stone
Friday February 03, 2012 - 09:50:00 AM

Last year, California State Senator Lou Correa (D-Orange County) was sued for a $4,000 debt owed by an unrelated “Luis Correa,” and learned of the lawsuit only after his wages had been garnished. Sear's billing department had handed the original debt off to LVNV Funding LLC, a debt-collection clearinghouse, which in turn hired the Brachfield Law Group to collect the actual debt. Brachfield sent numerous letters to Luis Correa that went unanswered. The company then apparently decided to stick it to Lou Correa instead. The senator sent numerous letters to Sears and Brachfield explaining they had the wrong Correa. Those letters went unanswered, too. Then came the order to garnish the senator's wages. 

Senator Correa shared his horror story with his Senate seat mate Mark Leno, the San Francisco Democrat, who drafted Senate Bill 890, "The Fair Debt Buyers Act," aimed at helping those in the same predicament as Senator Correa. 

Collection agencies and their attorneys file hundreds of thousands of lawsuits every year in California, many of which are filed against debt-free individuals such as Senator Correia with no connection to the original creditor. Incredibly, these lawsuits rarely include the information needed to prove the claim is legitimate, because current law doesn’t require it. Consequently, innocent Californians wind up with a judgment on their record or have their wages garnished because they were sued for someone else’s debt. 

SB 890 was introduced by Senator Leno in the 2011-2012 session, which, among other things, would prohibit a debt buyer from making any written statement in an attempt to collect a consumer debt unless the debt buyer has valid evidence in the form of business records that the debt buyer is the sole owner of the specific debt at issue, the amount of the debt, and the name of the creditor at the time the debt was charged off. This is a commonsense reform that will protect Californians.  

As a volunteer for Consumer Action and ABC-TV Channel 7, 7 On Your Side consumer hotline, and as a former attorney for the Federal Trade Commission, I can attest that many complaints concern the abusive tactics by debt collectors, especially during the current downturn in the economy. In fact, In 2010, the FTC, which enforces the Fair Debt Collection Practices Act (FDCPA) , received over 33,000 complaints alleging that debt collectors attempted to collect a debt that the consumer did not owe at all or was larger than the amount the consumer actually owed. These errors are not always due to honest mistakes by collectors. Instead, they too often are the conscious decision made by many debt buying companies to save money by not bothering to obtain the necessary documentation about the alleged debt. They then sign documents they haven't read and use fake signatures to provide phony verification when the legitimacy of a debt is challenged by consumers under the FDCPA. In this way, debt buyers can enhance their profits at the expense of many innocent consumers who are harassed or even endure frivolous lawsuits by collection attorneys. 


Creditors sell or assign debts to collection companies because they simply don't have the time or resources to hunt down all of their severely overdue accounts. Collection agencies have cheap labor and a streamlined system to pursue such accounts. If a collection agency is successful at collecting the money on the account, they usually keep a percentage of what is collected as payment for their services. 

Sometimes original creditors sell debts in large portfolios to collection agencies. Several of these companies, called Junk Debt Buyers (JDBs), are now being traded on Wall Street. The companies do not spend much money at all for these debts, sometimes paying cents on the dollar. Even if the debt is not a large debt, they often hire attorneys to send out mass form letters to debtors on the attorney's letterhead in hopes of collecting. Thus, even if they get a small percentage of the debtors to pay, profits can be very lucrative. 

SB 890 would introduce commonsense reforms that will protect all Californians, and level the playing field for responsible collection agencies. On January 31, 2012, the State Senate passed SB 890. SB 890 now goes to the Assembly.