Home > Personal Finance > When Debt Collectors Go After American War Heroes

Comments 1 Comment

When it comes to scandalous behavior by debt collectors, I thought I’d heard it all. This is an industry known for its bottom feeders, who routinely bully and intimidate the weakest and most vulnerable among us. Many debt collectors berate and humiliate people into paying off debts that never existed, and pursue people for years, even after the law, common sense, and human decency all demand that they cease and desist.

Now, not all debt collectors are evil, and for those who do it right, it’s a difficult and often thankless job. But that’s not who we’re talking about here. We’re talking about those whose limitless creativity in the pursuit of the dollar is only exceeded by their complete lack of morality. We’ve written about debt collectors in phony sheriff’s uniforms, who roust people from their homes, and hustle them into fake courtrooms, complete with “judges” in black robes flanked by law books and sitting behind raised desks. The purpose of this Star Chamber charade is to deceive and frighten their hapless victims into coughing up the cash on the spot.

Stories like these are legion and help to explain why the Federal Trade Commission receives more complaints about debt collectors than any other industry, year after year, with more than 180,000 complaints submitted in 2012 alone. Despite the Fair Debt Collection Practices Act — amended in 2006 specifically to rein in abusive debt collectors — this is an industry that is regularly found to operate on the very fringe of legality.

Still, the case of war veteran Michael Collier is a new low and paints a clear picture of a truly ugly nook in the financial services industry where abuse is rampant and often unchecked.

Michael Collier was 100 percent disabled after incurring head and spinal injuries while serving our country in the United States Army. The guy is a hero. Unfortunately, his condition left him unable to keep up the payments on his student loan.

According to a lawsuit filed by Collier, that lapse put another sort of target on his back, courtesy of the debt collection firm Gurstel Chargo. This saga began when the collector allegedly froze more than $6,000 in Collier’s savings account. That was illegal, according to a judge’s ruling in May 2012, since the funds that were frozen came from veterans’ benefits paid to Collier’s wife as a result of his injuries. The judge ordered that the freeze be lifted and Collier’s benefits returned.

In response, Gurstel Chargo ignored the judge’s order and maintained the freeze on Collier’s account for months. When Collier called and asked that his money be returned, what he got back instead was a profanity-laced tirade.

“F#!k you! Pay us your money!” the “legal assistant” allegedly yelled at this disabled war veteran, according to a report published by Stars and Stripes. “You can’t afford an attorney. You owe us.”

Angry yet? See if this lights your fire. The legal assistant then allegedly wished Collier dead. “I hope your wife divorces [you],” this miscreant spat out. “If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our a#!es off. Too bad; you should have died.”

Talk about scum.

Debt collectors who relish that feeling of power as they push disabled veterans and others around best watch their backs, because there is a hurricane of redemption headed their way.

In this case, Collier fired back with a lawsuit, which rightfully has garnered plenty of press attention. That’s a good start, but Collier’s action isn’t the only investigation that should happen in this case. Gurstel Chargo is based in the Minneapolis area, and Minnesota Attorney General Lori Swanson has been among the most proactive AGs in the nation in protecting citizens from debt collector abuse and prosecuting firms that violate the law. Collier is suing for civil damages, though the spin doctors at Gurstel Chargo are now scrambling to clean up this PR disaster.

“We are extremely disturbed by the allegations stated in the Complaint, as they are contrary to the policies, practices and values of our firm. We expect that all Gurstel Chargo employees fully comply with all state and federal laws, and we thoroughly train our employees to perform their job in a lawful and respectful manner. Under no circumstances does our firm tolerate the type of conduct alleged in the Complaint,” the firm posted on its website.

Nevertheless, a criminal investigation may not be out of the realm of possibility and may be justified here.

Not all debt collectors are so monstrous, but the industry’s long history of truly awful behavior has earned the ire not only of consumers, but also that of state attorneys general and at least two federal regulators, the Federal Trade Commission and the Consumer Financial Protection Bureau, which have flagged debt collectors as a persistent threat both to consumers’ livelihoods and to the American justice system itself.

Let me pause here for the requisite disclaimer — because unlike many debt collectors, I do believe in the rule of law. Even though some debt collectors pursue their targets as though they were judge, jury and hangman all rolled into one — sometimes demanding payment for debts they can’t even prove they have the right to collect — America is still built on the principle that everyone is presumed innocent until found guilty in a court of law. Maybe the legal assistant didn’t make such threats, or maybe they weren’t as awful as Collier alleges.

Before anyone grabs their torch and pitchfork, let’s wait for juries to make their determinations. However, if Mr. Collier’s allegations are true, then we must make sure that these debt collectors never again have the power to bully innocent people, whoever they might be.

Furthermore, the pursuit of justice in this case and so many others like it must not stop in Minnesota. For years, the Federal Trade Commission has been gathering data about misdeeds by debt collectors, and it has prosecuted some of the most egregious players. Many State AGs have litigated and won significant settlements as well. Unfortunately, this represents but a finger in the dike. FTC data indicates that misbehavior by debt collectors is actually getting worse, which tells me that the FTC and state regulators are overwhelmed by the number — and, in many cases, the sheer audacity — of debt collector abuses that they know about. What about the tens of thousands of incidents that no one ever hears about due to fear or intimidation?

Consumers obviously need more protection and fortunately, they’re about to get it. Under the Dodd-Frank Wall Street reform act, the Consumer Financial Protection Bureau has the power to regulate the “larger participants” across a broad range of financial industries — and debt collection is one of them. Although the agency is still hammering out its internal rules for how to investigate debt collectors (while facing formidable political opposition from the right), we know it will both conduct regular examinations of the biggest companies, and respond to major violations of law by taking those responsible to court.

We’ve already seen what the CFPB can do to clean up unscrupulous practices. Its enforcement actions like this one, this one and that one against various credit card companies over their questionable practices have put some $425 million back into victimized consumers’ pockets — and have put the credit card industry on notice that deception in the sale of financial products will no longer be tolerated.

Now it’s time for the consumer bureau to bring the same no-nonsense legal jiu-jitsu to the far more worrisome and nefarious world of debt collection. The Consumer Financial Protection Bureau is probably the best hope that heroes like Michael Collier have for defending themselves against debt collector predation and reforming an industry that routinely crosses into illegality. Frankly, I’m surprised President Obama hasn’t made this into a political issue, given Governor Romney’s and other Republicans’ desire to dismantle the CFPB.

The President should argue that rather than trying to repeal a law passed with resounding majorities in both houses of Congress and destroy an agency supported by 66 percent of Americans, Washington must join with responsible financial companies to create a level playing field for all consumers and corporations, and assure once and for all debt collectors never again abuse innocent citizens or wish death upon our nation’s heroes. It’s a message that would certainly resonate with me, and many of you I trust, as well.

Update: On October 19, Gurstel Chargo released a statement claiming that the firm was provided a cell phone number from the plaintiff’s attorney, and that “A thorough review of the Gurstel Chargo phone database reveals that no call from Gurstel Chargo to the number provided by plaintiffs’ attorney was made at any time from the hearing date through the filing of this lawsuit.” Further, Gurstel Chargo has claimed that the garnishment of funds from Collier’s account was in fact legal. “Only upon documentation being provided by the consumer, Mr. Collier, indicating the funds in his account were exempt, did it become proper to extinguish the garnishment. Gurstel Chargo did not and could not have known the funds were exempt in the absence of this documentation.”

Image: NYCMarines, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team