'Pure Country'

Lorrie Morgan

WASHINGTON -- Michael L. Hughes started getting the harassing phone calls several months ago. He figured they were from scammers and he tried to ignore them. Sometimes he'd pick up the phone just to hang up on them. Finally, he decided to find out what they wanted. The caller said Hughes was $12,000 in debt.

He checked his credit report and realized what had happened: The debt collectors had the wrong person. His credit report showed a $12,000 debt -- for Michael B. Hughes. They even worked at the same company. And now one's money troubles were dragging down the other's credit.

"They don't give a flip," said Michael L. Hughes, of Danville, Va. "They're not paying people to sit in an office and correct people's mistakes. They're in there to collect money."

Credit experts liken the incident to a financially dangerous game of tag that has become increasingly common as consumer-default rates hit record highs. Debt tagging prompted a Federal Trade Commission investigation of Credit Bureau Collection Services, or CBCS. The company agreed to pay more than $1 million to settle charges that it violated federal law by inaccurately reporting credit information and by pressing consumers to pay debts they often did not owe.

Hard times for consumers have meant boom times for debt collectors. And some can get their hooks into people who have never missed a debt payment.

Sometimes, as in the case of Hughes, they go after people with the same names as those who owe money. They might also relentlessly call wrong phone numbers, hoping to pry information out of whoever answers. Some finagle enough identifying information to make people seem liable for debts they never owed.

In the uncertain economy, people are especially sensitive to anything that can hurt their credit rating. The FTC said it recognizes that third-party collectors contact millions of people each year, and it receives more complaints about the debt-collection industry than about any other.

In its 2010 annual report on the Fair Debt Collection Practices Act, the FTC said it received 119,364 complaints about third-party and in-house debt collectors in 2009, up from 104,766 the previous year. To be sure, people who receive mistaken calls from debt collectors don't always report anything to regulators. In Hughes's case, he contacted fraud resolution specialist Identity Theft 911 to help repair the damage to his credit report. He said he hasn't heard from collectors since.

Mark Schiffman, spokesman for the credit and collection trade group ACA International, said the FTC does not separate consumer inquiries from complaints. He added that his agency has always worked with the FTC to get more clarity on its complaint data, but that it hasn't happened yet. "There are complaints, but we take them seriously and are resolving them to the satisfaction of our consumers," he said.

Reilly Dolan, assistant director of the FTC's Division of Financial Practices in Washington, said his team made a point of bringing the CBCS case.

"It's not an isolated incident," Dolan said. "We want a case out there to make sure everyone understands it's not acceptable."

Kristin Mack Deuber, a spokeswoman for CBCS, said that the FTC's allegations involved activities that took place years ago and the settlement didn't necessarily constitute a finding or admission by the company that it violated the law.

Although the agency disagrees with the FTC, it said the best business decision was to make the settlement.

Experts say tracking a debt back to its rightful owner can be complicated even for those who aren't having run-ins with regulators. Creditors can unload their debts onto others, sometimes for a fraction of the original value, and they don't always pass on much information to debt buyers about who owes the money. The debt can change hands multiple times, or even back and forth, and each message from one owner to the next is a new opportunity for muddled information.

Valerie Hayes, general counsel for ACA, pointed out that mistakes cost debt collectors time.

"They don't want to contact the wrong person any more than the wrong person wants to be contacted," she said.

Hayes said debt collectors can err when the debtor has a different phone number from the one first used. Sometimes telephone companies assign debtors' phone numbers to someone else. Or someone who moves into the home of a debtor might receive the person's bills or other communications.

Those seemingly random connections can pay off for collectors. Some will pursue a person who might cave under pressure. If consumers see inaccuracies in their credit files, they can dispute them, as Hughes did.

The credit reporting agency will then take the information and go back to the source to verify, according to Susan Henson, a spokeswoman for Experian, one of the major reporting agencies.

"The onus is on the original creditor to provide the proof," she said. The process takes at most 30 days and then Experian sends the corrected report back to the consumer.

Jay Foley, executive director at the Identity Theft Resource Center, said a person who feels harassed by a collector should write the agency and request delivery confirmation. After the letter is sent explaining that the collector is contacting the wrong person, the collector should stop. If not, consult a lawyer. "Document everything," Foley said.

Consumers can find lawyers in their state on the website for the National Association of Consumer Advocates.