SALT LAKE CITY (ABC 4 Utah) Debt collection is big business in Utah. There were 71,000 Utahns sued by debt collectors last year. More than 250,000 cases went to court in the past five years.
While many of these debts are legitimate cases, a lot are just plain fraudulent debt claims. Even if you don't owe the money, a judgement can be granted against you. Your property can be seized. Your credit and finances can take a big hit because of bogus debt claims.
This is the first of our Good4Utah three-part series on debt collection. During it, you will learn what can happen if a bogus debt collector makes you a target; what your legal rights are, how to protect yourself against false debt claims, and the financial tricks now being played on consumers just like you --- by companies who want to find a way around consumer protection laws.
Alicia and Derrick Westbrook found out about bogus debt collectors the hard way. The Draper couple run an office and home cleaning business. They say an old debt is stopping their business from growing. Alicia says, "In 2007, I went into Gold's Gym to find out about prices. They tricked me into signing a year-long contract, which I thought was just for a month."
Back then, Alicia says Gold's was charging about $400 a year for gym memberships. But since she thought the contract she signed was only for a month, and wouldn't cost more than $25 or so for that month, she didn't even bother to take a copy with her when she left. Derrick, her husband, says, "They told her it was a month long contract. She didn't read the fine print."
Lester Perry, a well-known consumer trial attorney in Holiday, says this kind of oversight---not reading the fine print---is common. But it shouldn't be. He adds, "That fine print is definitely worded against your best interests. But the problem is; they're contracts of adhesion."
Which means they're contracts where the terms and conditions are set by the business, and the consumer is stuck with whatever is described in the fine print. Perry adds, "If you don't agree to that fine print, you're not going to have a credit card, you're not going to be able to buy a car." Or a gym membership.
Alicia says that not examining the fine print is still costing her family today. A year after signing the original 'month long' contract, she got a phone call from Gold's gym. Now they were claiming she owed them $700. She says, "A few months later, I sent them in a check for $400. They cashed the check, which stated 'Paid in Full.' I heard nothing for, I would say, another year."
Suddenly Gold's Gym called again. They wanted another $700! She sent them a copy of the cashed $400 check. But that didn't stop the debt collectors. Just last year, Alicia was served a summons for a debt lawsuit by Liberty Acquisitions, a collection company that operates largely in Utah.
She had twenty days to 'answer,' or write to the court, telling them why she did not owe the alleged debt. But instead of waiting the full 20-day period, Alicia says Liberty Acquisitions went to court on the second day. This resulted in a 'default judgement.' That happens when the person being sued doesn't reply to the summons in time. The court will then automatically rule in favor of the debt collector. In Alicia's case, the 'default judgement' was $1,200, because these kinds of collection companies always add fees that may double, triple or even quadruple the original debt amount.
The Westbrooks finally found help from Ron Ady, a consumer protection attorney. He warns that if you are ever served with a summons, even if you don't owe the money, always 'answer' immediately.Don't ever leave a summons unanswered.
He also advises:
RESPOND TO THE COURT IN WRITING WAY BEFORE THE DEADLINE
EXPLAIN WHY YOU DON'T OWE THE DEBT OR THE AMOUNT STATED
SEND A COPY OF YOUR REPLY TO THE DEBT COLLECTOR AS WELL
SEND ALL CORRESPONDENCE BY CERTIFIED MAIL
There's more you can do to challenge a debt collection lawsuit. Taylorsville lawmaker Jim Dunnigan sponsored a bill in this year's legislature that gives consumers more rights---especially when it comes to payday loans. Dunnigan also suggests that if a consumer feels they've been treated unfairly, they should contact the Department of Financial Institutions in Salt Lake City.
"They're the regulator, and part of their job is to look out for the consumer," Dunnigan says.
In addition, examine those extra fees that pile on to the original debt amount. Jerry Jarimillo, of the Department of Financial Institutions, says to question those fees---especially in court. But there's a right time to ask those questions, he explains. "Sometimes the judge will say "You're being unfair here, let's reduce this amount..." The appropriate time to address that issue is before the judge makes a ruling. If the judge rules and says, 'Judgement granted in his favor for X amount,' it's over."
Sadly, it isn't over for the Westbrooks. Alicia's face grows downcast as she details what happened to her. "My credit card limits went down. My credit is ruined now. I never know what's going to happen, if I'm going to have a home next week or not. If I'm going to have a car, am I going to be able to afford that."
Derrick adds that the worst thing is the constant stress of arguing over money. Statistics show that the reason many relationships hit the rocks is because of arguments over finances.
But bogus debt collectors don't care. They can buy portfolios of debt on the internet for just pennies on the dollar---then use the system to go after people for as much as they can get.
But the system also works for you, the consumer, as well. In the second part of our investigation, which airs Thursday on ABC4 News, we let you know how to tell when a bogus debt collector is actually breaking the law; how you can protect yourself against them---and you'll meet a smart 'victim' who got a default judgement levied against her ---dismissed.
This is part 1 of a 3 part series on debt collection.
The three reports will air on ABC 4 Utah at 10 on Wednesday, April 30, Thursday, May 1 and Friday, May 2nd.
Investigator: Wina Sturgeon
Contributor: Robin Saville
Reporter: Don Hudson