- Legal Industry
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Recently, news coming from various parts of the country have reported on alarming irregularities in the debt collection industry in the United States. It has also been reported that there is now a widespread use of litigation, making it a collection tool. Various law firms and legal service companies are now focusing on this issue.
Prepaid Legal Services, an independent provider for law firms was able to respond to 79,000 legal service requests from their members. These requests were all related to collection issues. Over a span of 6 months, this figure comprises 7% out of the total 1.1 million requests.
In a July 2010 report, the U.S. Federal Trade Commission said that, “The system for resolving disputes about consumer debts is broken.” Before, collection agencies would call up consumers to collect any unpaid dues, but now, through electronic debt processing tools, the justice system is seen as one of the ways that they can collect debts.
In the report of the National Consumer Law Center, which is a consumer advocacy organization, it stated that, “Lenders, debt buyers and other creditors have learned how to use small claims and other low-level courts as a low-cost machine for turning claims into judgments against consumers who have fallen behind on payments.”
According to Harland C. Stonecipher, the Chairman of Pre-paid Legal Services, Inc., “This approach is flawed because it taxes the court system with an over abundance of collection suits and because it’s often utilized as a ‘scare tactic’ against consumers.”