News Articles

Zombie Debt

Saturday, October 28, 2006.

Brian J. O'Connor

Attack of the zombie debt Brian J. O'Connor

You may be a victim when old bills get new life.

Saturday, October 28, 2006

Brian J. O'Connor

Even though Halloween is nearly upon us, the worst fright of all out there isn't ghosts, goblins or even another week and a half of political ads (aaaaagh!).

It's the zombies.

As in "zombie debt," the nickname for a particularly creepy kind of collection tactic that recently tried to get its slimy hands on me and my checkbook.

Scary? It was more frightening than my 4-year-old, Li'l Money, hopped up on grocery bag full of Halloween goodies -- and twice as persistent. Here's how it works:

Zombie debt occurs when an old bill that you thought was long dead is sold to one of several specialized collection firms. These debt buyers pick up huge piles of charged-off bad debt for pennies on the dollar, then go off to collect what they can. But first, they typically run a few details through a sophisticated credit-scoring program that estimates how many of the alleged deadbeats (or at least people with similar names) are likely to pay the old bills.

Then the collection firms launch a round of phone calls, collection notices and even lawsuits to get the old bills paid. The more they collect, the more they make, which can -- and does -- lead to abuse, fraud and intimidation.

"This is something that has really gotten huge in recent years," says credit expert Liz Pulliam Weston, author of "Deal With Your Debt" and a columnist on MSNBC.com. "It's become this massive business."

How massive? One industry supplier estimates that collection firms will buy up $110 billion worth of debt this year, paying from 12 cents on the dollar to less than a penny.

In many cases, these are legitimate old debts that have dropped off the 7-year time span of your credit report. But like real zombies, zombie debt isn't particular about who it ends up feeding on, experts say.

That means someone with a similar name may be targeted for collection. Bills that were disputed, paid, dismissed in bankruptcy or never owed in the first place also are reanimated to stalk unsuspecting consumers.

In my case it was part of a 5-year-old phone bill I never was billed for and didn't owe. Nonetheless, there was a nasty collection notice in the mail demanding $39. When I asked the collection agency to prove that I owed the debt, there was no documentation. I was just referred to the phone company.

When the second notice came, I nearly did what a lot of upstanding consumers do: assume it was my fault and pay the thing, figuring it was worth $39 to keep my mostly sterling credit score safe from the corrosive effect of an overdue payment.

That, in fact, is what zombie debt firms are counting on: that most of use will react to any threat to our all-important credit scores by writing a check to make the problem go away.

"They are finding it's profitable even if they're going after the wrong people," Weston explains.

But several calls to Verizon in New York turned up the truth: that $39 had been mistakenly put on my account after it was closed. I had never even been billed for it.

Aha! Die, zombie!

I was lucky. There are some unscrupulous collectors who illegally put old debts back on your credit report, or try to trick you into paying a portion so they can reactivate the full debt.

Some collectors also ignore the debt statute of limitations. In Michigan, the statute of limitations on debts is six years. Once the deadline has passed, a collector can't go to court to force payment. But that doesn't stop some zombie debt firms from going to court, knowing that most consumers ignore the notice. Then they win a default judgment and can enforce it to collect the old debt, even garnishing wages.

Some collectors also ignore the debt statute of limitations. In Michigan, the statute of limitations on debts is six years. Once the deadline has passed, a collector can't go to court to force payment. But that doesn't stop some zombie debt firms from going to court, knowing that most consumers ignore the notice. Then they win a default judgment and can enforce it to collect the old debt, even garnishing wages.

The Michigan Attorney General's office has received hundreds of complaints about zombie debt problems, says spokesman Ari Faneuil. "They've really upped (collection) in the past couple of years."

But some consumers are fighting back -- enough to make it a full-time practice for consumer protection attorney Brian P. Parker in Bingham Farms.

"My business is booming," he adds. "Probably 20 percent of my clients don't owe these debts, and they're just being pestered to death. But that's why these collection firms are successful -- people will wear down. If it costs them $200 for peace of mind, they'll pay it."

But that's the easy way out. If we've learned anything from the watching cheap B-movie horror films (other than the fact that necking teenagers are doomed) it's that nothing is as satisfying as watching a zombie die.

Unlike the movies, however, you won't need a sledgehammer, Molotov cocktail or even a chainsaw. A simple letter to the debt collector asking for proof of the debt owed is all it takes to send many zombies stumbling away. Then you can go on to worry about something really scary: the Christmas sales that start the day after Halloween.

Aaaaaagh!

Aaaaaagh!

Fighting zombie debt

Pay attention:Don't ignore anything you getfrom a bill collector.

Know the statute of limitations: It's six years in Michigan. If expired, the agencies' legal remedies are limited.

Write a letter:You have 30 days to dispute a collection notice, says attorney Brian Parker, but it must be in writing. Send a certified letter, return receipt requested, and ask for proof that you owe the debt right away. Make sure the letter specifically says that you aren't acknowledging you owe the debt.

Admit nothing:There's little to gain and a lot to lose if you keep talking to a zombie. You could inadvertently extend the statute of limitations or find yourself roped into a repayment agreement.

Know your rights:Credit and debt collections are complicated area of the law. If it's big money or the harassment unbearable , contact an attorney. The National Association of Consumer Advocates www.naca.net or (202) 452-1989) can provide referrals.

Source: MSNBC.com and Collectionstopper.com

You can reach Money & Life Editor Brian J. O'Connor at (313) 222-2145 or boconnor@detnews.com.

Verizon hassles couple over mystery man's debt

By Melanie Payne Originally published on October 30, 2007

Collection calls can get annoying.

But imagine how annoying they would be if you didn't owe the money and the calls were coming in for a stranger.

That's the nightmare Jacqueline and Robert Kelly have been living ever since they returned to their south Fort Myers home after a summer in Maine.

Since early October, the Kellys have received several recorded collection calls a day from Verizon Wireless looking for someone named James Tuthill.

"I don't know anyone named James Tuthill," Jacqueline Kelly said, adding that they have had the same number for five years.

Jacqueline Kelly explained all this to a supervisor at Verizon Wireless who told her that it was the number Tuthill left for the company to get in touch with him.

"How can they think they can reach him here when he's not here, has never been here and won't be here in the future?" Jacqueline Kelly asked.

Jacqueline Kelly said a supervisor told her to expect the calls until Verizon contacted Tuthill.

Jacqueline Kelly said a supervisor told her to expect the calls until Verizon contacted Tuthill.

"That really made my blood boil," she said. "We are stuck with receiving these annoying telephone calls for, presumably, the rest of our natural lives while Verizon hopes that James will miraculously turn up at our house."

Naturally, my phone call to Chuck Hamby the spokesman for Verizon got a better response. Hamby said he would contact the credit department and tell the department it can't reach Tuthill at the Kellys' number.

So the Kellys' problem is solved, but according to Andre Lamme, this type of thing happens to millions of people every day.

Lamme runs the Web site www.killthecalls.com, which advises people on how to stop telemarketers and prevail against them in small claims court.

But collection calls are different, he said.

"They can hassle you to death until you send them a certified letter telling them to stop."

Lamme said that if the calls don't stop, you can go to court, but the $1,000 you may be awarded in court hardly makes it worthwhile.

Still, I did find an attorney, Brian Parker, who takes on cases against collectors in Michigan and Florida.

Parker said the first step is to get the address of the caller and send a certified letter stating that you want the company to "cease and desist" calling your home. Consumers who contact Parker www.collectionstopper.com can get a copy of the letter to send.

If the collection company violates the Fair Debt Collection Practices Act, it has to pay attorney fees, Parker said. So there are no costs to the consumer when he takes the case.

As the economy worsens, more people will be receiving these types of calls and many are going to be bogus, Parker said.

"The theory is if they bug you enough for 200 to 300 bucks you'll just pay it, and people do it."

The Kellys want nothing to do with Tuthill or Verizon Wireless, but they aren't paying to get rid of them.

I did, however, try to locate the elusive Mr. Tuthill. I gave up after finding only a post office box and no phone number.

So I understand Verizon Wireless' frustration.

But I can tell them this for sure: he's not living with the Kellys, so don't look for him there.

For more Tell Mel columns and reader forums go to news-press.com/tellmel. Write to Tell Mel at 2442 Martin Luther King Jr. Blvd., Fort Myers, 33901. Call 239-344-4772. E-mail her at tellmel@news-press.com