Debt Collection Horror Stories

Debt collector horror stories abound: There are threats to dig up the dead relatives of those who couldn't pay their funeral bills, promises to imprison debtors or take their children into custody -- even warnings that pets will be killed.

Under the Fair Debt Collection Practices Act, collectors are prohibited from threatening violence, using profane language, calling incessantly, inflating a debt and implying they are attorneys. And they can't tell consumers they will arrest them or garnish their wages or property unless they actually plan to take that action and are legally able to do so through a court order. Many states have their own rules governing debt collector practices as well.

These are some of the latest outrageous allegations of abuse:

Threatening to take away children: Last week, the Federal Trade Commission shut down a Texas-based debt collector, Goldman Schwartz, for using deceptive and abusive scare tactics to force people to pay their payday loan debts. Among the alleged offenses: collectors called consumers incessantly, saying "we can take you to jail" or "we'll send the sheriff's department to your job and take care of this the hard way," even though they had no legal basis to do so.

Collectors went so far as to tell consumers that when they go to jail, police or child protective services would take their minor children into government custody, according to the FTC. Goldman Schwartz hasn't responded to the complaint filed by the FTC, and its attorney declined to comment on the case.

Posing as a law firm: To scare consumers into paying, Goldman Schwartz also allegedly posed as a law firm or claimed to work with law enforcement authorities -- even charging unauthorized attorney's fees that it referred to as "juice."

One consumer, who asked to remain anonymous, filed a complaint against Goldman Schwartz claiming its collectors pretended to belong to a law firm one day, and the next day said they worked for local law enforcement. After calling her incessantly over a $300 payday loan debt -- which she said she already paid -- a collector even called her workplace and told her coworkers he was going to come arrest her and they would have to pick her out of a lineup.

Pretending to have legal authority has become a popular tactic among debt collectors. In a separate lawsuit filed by the Pennsylvania Attorney General that's still pending, a debt collector, Unicredit, was charged with decorating an office to look like a courtroom and holding fake court proceedings. The attorney for Unicredit's vice president said "he was not personally involved" in the activities that the lawsuit alleges, and the president's attorney did not respond to a request for comment.

Threatening to dig up dead bodies: Another collection agency, Rumson, Bolling & Associates, was fined more than $700,000 last month for taking harassment to a whole new level. One of the worst offenses listed in the FTC's lawsuit: collectors allegedly threatened to dig up the bodies of debtors' deceased children and hang them from a tree or drop them outside their door if they failed to pay their funeral bills. The defendant's attorney, Christopher Pitet, said the company's owners did their best to ensure collectors complied with the law -- so if any wrongdoing was done, it was done by employees and was against company policy.

Promising to hurt pets: The harassment didn't stop at dead bodies, according to the FTC. Collectors at Rumson, Bolling & Associates also allegedly threatened to kill a debtor's dog. Specifically, collectors told a woman they would have her dog "arrested ... shoot him up and ... eat him," before sending the police to her house to arrest her, the FTC claimed.

Collecting debts owed to other companies: Along with all the harassment, the FTC has seen a new collection scheme pop up: scam artists are stealing customer information from payday loan websites and then disguising themselves as debt collectors and going after the loans customers take out, said Tom Pahl, an assistant director at the FTC.

 In one case, a phony California-based debt collection outfit run by a man named Kirit Patel allegedly collected more than $5.2 million in debts that were owed to payday loan companies -- or weren't owed at all, according to the FTC. The defendant's attorney, Andrew Steinheimer, said Patel was duped into opening the company by someone else and was unaware of any wrongdoing.

The case was referred to the Justice Department, and a federal grand jury indicted Patel last year. If convicted, Patel will face up to 20 years in prison or a fine of $250,000 (or both).

"[These debt collection agencies] continue to taint the professionalism of the vast majority of collectors that do it the right way -- respectfully and in compliance with federal and state laws," said Mark Schiffman, a spokesman for debt collection trade association ACA, which represents more than 3,000 debt collectors.


Warren Buffett's Best Stocks of 2013 Helping Him Beat DJIA/S&P500

2013 is yet another year getting off to a great start for stocks, and Berkshire Hathaway Inc. (NYSE: BRK-A) is actually outperforming the broad stock market so far in 2013. As of Tuesday, the S&P 500-tracking SPDR S&P 500 (NYSEMKT: SPY) is up about 6% and the DJIA-tracking SPDR Dow Jones Industrial Average (NYSEMKT: DIA) is up about 7%. With a 1% gain on Tuesday, Berkshire Hathaway Inc. (NYSE: BRK-A) A shares are up 9.3% and the Berkshire Hathaway Inc. (NYSE: BRK-B) B-shares are up by about 8.7%.

We have looked at the year-to-date performance of Warren Buffett's portfolio holdings of Berkshire Hathaway Inc. (NYSE: BRK-B) to see which stocks he has that are helping to drive gains so far in 2013.  We looked through all of Warren Buffett's top stock holdings to identify the biggest winners. What is so interesting today is that the actual Berkshire Hathaway shares are outperforming about 90% of the actual stock holdings that make up the Buffett and Berkshire investment portfolio.

We have included the purchase or sale transaction history of each pick. We have also provided color and the implied upside to the Thomson Reuters consensus (mean) price target objective.

Phillips 66 (NYSE: PSX) remains a relatively new holding for team Buffett but was kept steady last quarter at 27.1 million shares worth more than $1.65 billion. It is also Buffett's top stock in 2013 so far with gains of more than 15%. We expect that the way Mr. Buffett talked so positively about this oil refinery that he may add to the position ahead. We expect upside to the 1.6% dividend yield and this trades with more implied upside as the $61.30 price is short of the consensus analyst price target of $66.38.

Procter & Gamble (NYSE: PG) has been on fire in 2013 and shares have been hitting new 52-week highs and this DJIA consumer products giant is up about 13.5% so far in 2013. What is interesting is that Mr. Buffett had been lowering his stake and it had fallen by nearly half of its share amount down to 52.8 million shares. That number may be even lower ahead as Buffett tends to keep selling stocks he starts selling out of. If the position is somehow static, that position would be worth more than $4 billion. This hit a 52-week high on Tuesday above $76.50 and the consensus analyst price target is $78.75 with a 3% dividend yield as of now.

We have two runner-ups which we are not formally counting as Buffett's best performing stocks even though they have been in the holdings before. United Parcel Service, Inc. (NYSE: UPS) is technically the third best position in the Team Buffett portfolio, but there is just one small problem. This had been almost entirely eliminated down to 59,400 shares from 261,900 shares last quarter and versus 1.429 million shares two quarters ago. That being said, this 9% gain year to date is almost immaterial for Berkshire's $242 billion market cap. Ingersoll-Rand (NYSE: IR) is yet another one which would have been great had Buffett remained on its side, but he has sold out of that position in late 2012 as well. That is too bad as this was up 8% year to date in 2013.