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The one industry that seems to be weathering the bad economy the best is the collection agency industry.  Sure, they’re a needed commodity, but it seems that many of the ones around today have come out of nowhere and are going after dollars that either have already been paid or aren’t allowed to be gone after in the first place.

Rubin & Raine Inc., whose company’s corporate offices are out of Eatontown, NJ, was recently the subject of an investigation by the state of New Jersey for attempting to collect on bills that were past the state’s statute of limitations, which is only six years.  Some of the bills they were trying to collect on were also already paid.  These were old hospitals bills, and they hadn’t verified whether any of the bills had already been paid before starting their efforts.  They have agreed to cease trying to collect on any claims older than six years and to verify whether the accounts are open or not.  This could be a problem since the hospital whose claims they’re working closed in 2007.

In another story, a Michigan collection agency, International Collection Services, has lost its license to do collections in the state because they were collecting payments from people, then instead of informing their clients that they had received the payments were using the money for other purposes, in essence keeping people’s name on credit reports instead of closing out accounts and sending their client’s the portion of what they’d collected. 

And finally, in New York State, Attorney General Andrew Cuomo hit 3 collection and debt consolidation businesses with penalties totaling $245,000 and got agreement to change their collection techniques.  The three companies were Creditors Interchange Receivable Management, LLC, Capital Management Services, LP and Tri-Financial, LLC.  There was no official word on what they did, and none of them admitted any wrongdoing, but all said they would comply with the Fair Debt and Credit Collections Act. 

This followed Cuomo closing a collection agency, which actually ended up being two agencies owned by the same person. Lamont Cooper and two debt collection firms he owns that operated in the state, Emanee Development, Inc. and Dial Tech LLC., were ordered to shut down, and Cooper was ordered to pay restitution to consumers statewide. Cooper and his companies are permanently barred from engaging in the debt collection business and acting as brokers that buy and resell portfolios of consumer debt.  The attorney general’s office alleged that Cooper’s companies told debtors that they were criminals, threatened lawsuits and arrest, engaged in third party disclosure, and other violations.

Not all debt collection agencies are bad, but the behavior of these agencies points out that all of us have to be vigilant in protecting our names and our credit histories.  If you believe you’re paid a bill and are still being pursued, fight it.  Ask for proof, and if you’re not satisfied, take it to someone higher.

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In these tough financial times, I’ve been a big proponent of people cutting up credit cards with high outstanding debts and paying them down.  In general, that goes counter to what many financial analysts have been telling people to do, saying it will bring down credit scores.

My point has been that credit scores mean nothing if a person continues wracking up more and more debt, as that also hurts one’s credit score, and that it’s better to gain control over spending while working towards getting out of debt.  A high credit score only tells people that you look like a good risk at getting more credit.  However, if you’re already overly maxed out, you’re already past the point of no return, and it’s more important to gain control.

That’s why it was good seeing a statement coming from Greg McBride, the senior financial analyst at BankRate.com.  He stated just what I’ve been saying for months now:  “Consumers have a tendency to focus on the nuances of credit scoring and often lose sight of the bigger picture.  They are so worried about something hurting their credit score, particularly in an environment like this one where lenders are tightening up and making it harder to qualify, that they are willing to live with bad terms that they never would have agreed to in the first place.”

These days, credit card lenders have started penalizing their good paying customers to recover from those customers of theirs who have had problems keeping up with their debt.  Recently, Capital One began jacking up some of their customers rates more than 7% in an attempt to get back to solvency.  American Express went a different way, by capping limit amounts on cards and making people pay more to pay off their monthly balances.  Both alienate their customers, but the worst part is financial “experts” going on TV telling people that they should just accept the limits, pay off the cards, and protect their credit scores.

If you’re someone who pays off your monthly balances as soon as you accumulate them, having your interest rate jump that high that quickly may not impact you much at all.  However, if you’re someone who carries a balance, it might not be in your best interest to keep that card, especially at a much higher rate.

A calculation might help you understand what you might be up against.  Say you have a balance of $2,000, an annual percentage rate of 13.9%, and your monthly payment at the present time is $35.  If you always paid $35, even though the amount of your minimum payment will go down with your balance, you’d end up taking 7 2/3rds years to pay off your balance.  If you take those same numbers, only increase the APR to 20.9%, it would take you 25 3/4ths years to pay off the same balance.

Is it worth any credit score to allow banks or other lenders to take that kind of advantage of you?  It’s something to seriously think about.

See more:
Credit Card Debt Consolidation
Should I Cancel My Credit Cards?
How to Get Out of Debt Part I