Debt Collector Fined $25 Million

Borrowing, Debt Collection


Debt collectors have been known to go to great lengths to collect unpaid debts. On occasion, a debt collector will go too far and face legal action. Consider the recent case of Joseph Onwuteaka, a lawyer and debt buyer from Houston, Texas, who faces $25 million in civil penalties and another $560,000 in legal fees for violation of consumer protection laws.

In June of this year, a jury found that Onwuteaka violated state laws with his methods of suing debtors. Onwuteaka’s companies bought old, written-off consumer debt at a bargain price and began contacting the debtors seeking payments – typical practice for a debt collector. Where Onwuteaka erred was in suing debtors who lived far from his Houston office without filing the suits in either the county where the debtor lived or the county where the documents creating the debt were signed.

These debtors were generally unable to show up in a faraway court to defend themselves, leading to default judgments in Onwuteaka’s favor regardless of whether the money was legally owed. The jury found that almost 900 consumers had been unfairly targeted in this way. The attorney has asked for a new trial.

If a third-party debt collector used questionable tactics on you, would you know how to handle the situation? If not, it’s time to review the Fair Debt Collection Practices Act (FDCPA). The FDCPA outlines the rights of consumers with respect to debt collection and the rules that debt collectors must follow.

By FDCPA rules, a debt collector must send you a notice in writing outlining the amount that you owe, the creditor’s name, and what to do if you dispute the charge. Ask for this information before engaging in any discussion with the debt collector. You can dispute the charge in writing within 30 days of receipt of the collection notice.

Debt collectors are not allowed to harass you with threats of violence or incarceration, use obscene language, call repeatedly, or call outside the hours of 8 a.m. to 9 p.m. (unless you agree to be contacted). They may not misrepresent the size of your debt or pretend to be a member of law enforcement, an attorney, or a representative of a credit bureau.

You have several methods of recourse for debt collectors engaging in unscrupulous practices against you. If you aren’t sure that the debt collector violated the FDCPA or state law, start by contacting your state Attorney General’s office for clarification. You can file a report with the state Attorney General and the Federal Trade Commission (FTC) if violations have occurred.

Feeling litigious instead? You can choose to sue the debt collector in either state/federal court or small claims court. Smaller, less complicated issues are best suited to small claims court. You will not need the services of an attorney there and the timeframe is much shorter. You may be able to collect higher damages in state or federal court, but have an attorney and be prepared for a prolonged battle.

When you are just one of many people alleging abuse by the same collection agency, a class action lawsuit may be the best course of action.

If you have strong evidence of the debt collector’s violation but prefer to settle, you can use your information as leverage to get a favorable settlement. Obviously, it is important for you to have solid evidence, such as letters and records of calls. Remember to retain all original documents – only send copies elsewhere.

Debt collectors hope that your lack of understanding of debt collection laws and unwillingness to fight will lead you to pay off a debt, whether you rightfully owe money or not. Know your debt collection rights. Don’t let a lack of understanding cost you money and drag you into a time-wasting adventure.

If you want to settle outstanding debts for less than what you owe, try our debt settlement tool.

Photo ©iStockphoto.com/AndreyPopov



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