Collection Lawsuits on the Rise

With the economy down, lawsuits against collection agencies in the Northern District of Alabama almost quadrupled, reports The Birmingham News. This past year, 158 lawsuits were filed against collection agencies and credit bureaus for violations of the Fair Debt Collection Practices Act, up from a scant 40 suits filed the year before. Moreover, the lawsuits aren't for technicalities such as giving a few days less notice than required by law. A large percentage of the disputes involve cases of mistaken identity or consumers who paid the debt but can't prove it.

But bill collecting seems to be a growth industry these days, with the collection division of Encore Capital reporting a 12 percent increase in collections for last year as well as a 26 percent increase in profits, according to the story. And as collection agencies thrive, so too do the lawyers who sue them, collecting attorney fees and costs when they prove FDCPA violations.

In spite of the increase in debt lawsuits, they account for just a tiny fraction of the 1 billion collection matters handled annually, the story says. Is that because collection agencies are getting it right -- or are consumers simply not aware of their rights against a collection agency that overreaches?