This past week, Lori Swanson sued a local debt buyer for tacking on illegal interest to old checking accounts purchased from Wells Fargo and U.S. Bank. The suit alleges that Bradstreet & Associates added 21.75% interest to the charged-0ff amounts of the debts they purchased. Here is an article describing the suit in greater detail.
When I read this article, part of me was surprised and part of me wasn’t. I was surprised because I couldn’t believe an organization, no matter how seedy, would be dumb enough to add that much interest onto purchased accounts. First, 21.75% seems like an arbitrary amount. If Bradstreet were a collection agency, I could see it arguing that it was adding on its fee for collection, but it isn’t; it’s a debt buyer. Second, part of Bradstreet’s business model is going to court and getting judgments (often buy default) on these account. No matter how much of a rubber-stamp one thinks the courts are, at some point, a judge had to have made them justify the interest they were adding.
With all that said, I am not surprised to hear of Bradstreet, or any other debt buyer/collector, adding amounts to an account that they are not legally entitled to. Agencies, debt buyers, and, yes, even law firms, frequently misstate the amount of the debt or charge interest they are not entitled to. In some instances, it is outright fraud, but more often, it is something far less nefarious. The original creditor transmitted the wrong information, whoever input the data misunderstood the underlying account, or even a software malfunction that incorrectly computed interest. This happens far, far more than anyone in the collection industry would care to admit.
What this means for consumers is that they should not take demands made by debt collectors at face value. Anyone getting a demand letter should ask for an itemization of the amount claimed, and anyone sued should Answer the Complaint and make the creditor prove up the amount owed. Better yet, contact a consumer rights attorney. If a debt collector overstates the amount of a debt you owe, not only will that amount be reduced, but you are entitled to additional monetary compensation under federal law.