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Dealing with debt collectors can be a nightmare, especially when they employ illegal or unfair debt collection practices. Many consumers don’t realize they have rights and are protected under the law from certain debt collection abuse.
One of the industries prone to debt collection abuse is the mortgage industry. Lenders like Ocwen Financial, Citibank, Comenity, HSBC, and Wells Fargo have all faced lawsuits accusing these companies of violating the federal Fair Debt Collection Practices Act.
The FDCPA prohibits debt collectors and creditors, including major banks, from using the following tactics:
- Debt collection harassment
- False statements and deceptive practices
- Collection of expired debts
- Making improper reports to credit reporting agencies
- Improper debt collection after foreclosure
- Improper communication with third parties
- Failing to disclose the right to dispute the debt
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In addition to FDCPA laws, many states like California, Arizona, Nevada, Oregon, and Washington have also enacted additional debt collection laws to protect borrowers from improper debt collection after foreclosure.
Unfair Foreclosure Debt Collection
Some states have passed laws prohibiting lenders from attempting to collect from homeowners who owe a deficiency on their mortgage after certain types of foreclosure. A deficiency is the amount remaining on a mortgage that is greater than the value of the home at the time of foreclosure.
Despite these legal protections, some lenders still attempt to unlawfully collect deficiencies from borrowers.
Lenders like Ocwen Financial, Citibank, Comenity, HSBC, and Wells Fargo are currently facing a class action lawsuit investigation for these alleged practices.
Overview of FDCPA Laws
In the time of economic difficulties, financial entities and consumers alike become increasingly desperate to gain money and maintain it. Debt collection lawyers have noticed that an increasing number of debt collectors, lenders, and creditors using illegal debt collection practices in order to collect money.
Legal experts remind any potential victims that certain debt collection practices could qualify them to file a legal claim against the company. Under FDCPA guidelines, consumers are protected from the following:
- Debt collection harassment: With few exceptions, debt collectors are not allowed to contact debtors who have already been notified about the debt.
- False statements and deceptive practices: Debt collectors may not use any deception tactics to collect a debt. This can include: misrepresenting the amount that is owed, falsely representing that the collectors is a debt attorney or government representative, and producing misleading correspondence that appears to be a legal document.
- Collection of expired debts: Debt collectors are generally prohibited from collecting debts that are more than four years old. However, some credit companies have been found to still try by not telling the debtors that their debts may have expired and threat litigation.
- Making improper reports to credit reporting agencies: Despite being directly against FDCPA policy, many lending companies have been accuse of reporting post-foreclosure deficiencies as debts, even though they have no right to collect them. It can also be when debt collectors unlawfully fail to notify credit reporting agencies that a debtor has already disputed a debt.
- Improper debt collection after foreclosure: Within five days of the collector’s initial communication, they must send a written notice of the right dispute the debt or request verification of the debt.
- Improper communication with third parties: Contacting a debtor’s family members, employers, or other people in connection with the debtor to collect the money. This can also include when the company fails to disclose the right of dispute to the debtor.
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Join a Free Unfair Debt Collection Class Action Lawsuit Investigation
If a lender or debt collector engaged in unfair debt collection practices, you may have a legal claim and could be owed compensation for violations of the Fair Debt Collection Practices Act (FDCPA). Obtain a free case evaluation now.
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One thought on Debt Collection Abuse Among Mortgage Lenders a Growing Problem for Homeowners
I bought my home in 2005. In two years my payments went from around $550 a month to $990 a month. They forced me to do a loan modification that gave me a $50000+ final payment. It was agree to that or lose my home. I was twenty and my wife was 19 when we bought this home. I didn’t even have a job. However I did have $30000 down payment. They have harassed me for years daily even after I talk to them. They speak broken English which leads to major miscommunication. This is the essence of a predatory loan.Now we have lived here for 15 yrs and our balance has not budged. PLEASE HELP.