Mortgage Balances Rise, Borrowers Defer Payments, and Officials Target Abusive Collections

Although complaints of abusive collections remain relatively flat across Connecticut, state and federal officials see a growing debt problem that is ripe for abuse.

According to Quarterly Reports from the Federal Reserve Bank of New York, the amount of debt that the public has accrued nationwide has gone up since the start of the pandemic. 

Total household debt balances increased by $155 billion in the first quarter of 2020, an increase that was mainly driven by mortgage balances, which grew to $9.71 trillion. Household debt dropped in the second quarter by $35 billion, but mortgage balances increased by and additional $63 billion. 

Anne Lejeune, a lawyer with the Federal Trade Commission, said that when it becomes difficult for agencies to collect on debts, there begins to be a rise in abusive debt collection practices —  collectors impersonating law enforcement, falsely threatening lawsuits or arrests, sending robocalls to leave deceptive messages and demanding that people pay debt that they do not owe.

The Federal Trade Commission, the Consumer Financial Protection Bureau and the U.S. Department of Justice joined Connecticut and 15 other states in a nationwide crackdown against companies alleged to be practicing illegal debt collection. The crackdown, called Operation Corrupt Collector, was announced September 29. 

Lejeune said that the commission’s work to prosecute abusive debt collectors began well before the pandemic, but officials acknowledged that current economic struggles have made the operation more relevant. 

“At a time when consumers are under financial stress, it’s even more important to crack down on debt collectors,” said Jay Mayfield, a senior public affairs specialist at the Federal Trade Commission. 

In Connecticut

Matt Smith, director of government relations and consumer affairs at the Connecticut Department of Banking, said the department has not seen an increase in people unable to pay their mortgages. For now, Smith said, most people in financial difficulty have opted into forbearance programs, either through the federal CARES Act or through financial institutions. Federal programs currently allow borrows to defer on mortgage payments for up to 360 days. 

Smith said that the department has received 70 complaints regarding abusive collections this year, a number he said was on par with previous years. 

Lejeune cautioned, however, that there is often a delay between the onset of a financial crisis and a rise in complaints regarding debt collections, as borrowers exhaust their savings before falling behind on payments.

So far in 2020, the FTC has received 585 debt collection reports from Connecticut, 212 related to abusive debt collection. In total in 2019, the FTC received 983 debt collection reports from the state, 337 related to abusive collection practices. 

According to press release from the Office of the Connecticut Attorney General, their office has received over 30 complaints in the past year residents claiming harassment by collection agencies.

Recent complaints include a Somers resident who reported a call from a debt collector with access to his personal information. The collector allegedly threatened to take him to court over a $2,000 debt. In another case, a New London resident filed a complaint about a collector who called regarding a disputed payday loan of more than $500. 

Lejeune said that people contacted by a debt collector threatening to suspend their driver’s license should report the call to the FTC. They should also check with their creditor to make sure that a collector has been authorized to collect the debt. Finally, Lejeune said, people who believe they’ve been incorrectly contacted should contest the debt. 

Information about how to recognize and report abusive debt collectors can be found on the FTC website.

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