Posted by Chris Oberholtz, Multimedia Producer - email
By Stacey Cameron, Investigative Reporter - bio | email
By Kelly Just, Special Projects Executive Producer - email
BUTLER, MO (KCTV) -
A Butler woman, unable to convince aggressive bill collectors that she actually owes no money, is just one of the many Americans that phantom debt collection agencies are currently chasing down.
Judith Leonard, 79, isn't too proud to admit that the economic shine on her golden years has become a bit tarnished.
"I get food stamps and I go to the pantry," Leonard said.
In March 2011, Leonard's limited means grew even leaner when she fell down in her kitchen and broke a leg. The injury required a hospital stay at Shawnee Mission Medical Center.
"Oh you wouldn't believe my X-ray," Leonard said. "It was so bad I couldn't even look at it."
For the first time in decades, Leonard was in debt, facing an $1,100 medical bill she couldn't afford to pay. When collection agency Kansas Counselors, Inc. called to demand money, Leonard set up a modest payment plan of $50 a month. For three months, Leonard kept her word, faithfully mailing in her payments, even using some special address labels she'd had made.
"I was planning on paying them," she said.
But $150 into that payment plan, Leonard received a letter from Shawnee Mission Medical Center informing her that her entire debt was being forgiven, her account had been returned to zero.
Relieved, Leonard sent two copies of that letter to KCI and called the company to explain her debt had been cleared; and she was actually owed a $150 refund. Instead, Leonard says she got a lesson in phantom debt when the collection company made harassing phone calls seeking the payments she was no longer required to make.
"He was really belligerent," Leonard said of the debt collectors who kept calling. "He was going to come and break my other leg, it sounded to me like."
Leonard's story is one Chris Thetford, of the Better Business Bureau branch in St. Louis, MO, hears all too often.
"The aggressive tactics that consumers tell us about all fly in the face of the rules and regulations set forth by the Federal Trade Commission in the Fair Debt Collection Practices Act," Thetford said.
Among those tactics is an increase in attempts to collect money that is no longer owed, what's become known as phantom debt.
Thetford says back when the economy tanked, many collection agencies bought a mountain of consumer debt on the cheap. He estimates the companies are working to recover $215 billion. According to Thetford, in many cases the collection agencies have very little information on the debts they purchase. As a result, it's not uncommon for them to end up calling on debts that have been discharged in bankruptcy, time barred from collection under state law, forgiven by the creditor or simply never owed in the first place.
So, finding out the money is no longer owed by a consumer doesn't erase the need to collect the agreed-upon amounts.
"There's a money motive for debt collection agencies to be more aggressive because of the dollars involved in the books of debt that have been sold," Thetford said.
In most cases, someone in Leonard's position could fight phantom debt collection practices with help from the Attorney General's office but that is not an option in the Show-Me State.
"Missouri does not have a state version of the fair debt practices act," Thetford said. "Because we don't have a state law it's impossible for the Missouri Attorney General to take action against these debt collection companies."
With the Missouri Attorney General unable to step in and Leonard still fearing harassment, KCTV5 News investigative reporter, Stacey Cameron contacted KCI by phone and by person at the company's Lenexa, KS office to see if he could clear up the mess.
One day later, two separate letters from KCI arrived at Leonard's home in Butler. The first revealed that all collection efforts had been dropped. According to KCI, "Please be advised that the account listed below has been deleted from this customer's credit history."
The second letter contained a check for $150, a refund for the three payments Leonard had made before the hospital wiped out her debt. Finally, Leonard felt a true sense of relief about this billing nightmare.
"If you're sure that you've been wronged, then tell somebody that cares." Leonard said. "And I appreciate your caring," she told Cameron.
In a separate email sent to KCTV5 News, KCI said it too cares about Leonard and apologized for the way she was treated. The company president said he was going to investigate the matter and forward the results to KCTV5. That answer has yet to arrive.
So how can someone combat phantom debt?
When contacted by any collection agency, consumers have the right to request written proof of the debt. Verbal communication is not enough.
If a person proves he/she doesn't owe any money and the harassment continues, complaints should be filed with the Federal Trade Commission, which monitors the Fair Debt Collection Practices Act, the state attorney general and the Better Business Bureau.
The BBB has had quite a bit of success dealing with these companies, getting them to stop contacting consumers who do not owe money.
Copyright 2012 KCTV (Meredith Corp.) All rights reserved.
Right now, debt collection agencies are chasing down overdue payments from 30 million Americans. A number of those consumers don't actually owe any money but are unable to convince the aggressive billMore>>
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