Are You Being Sold Down the Debt River?

One of the credit world’s painful surprises is a lender who suddenly hands your account off to a new owner. Typically this will happen because you have defaulted, but not always.

It is important to understand that you do not have to actually be behind on your loan payments for bad things to happen. If you live in the “wrong” zip code, work in the “wrong” industry or otherwise seem to be a deteriorating credit risk (even if you’ve never missed a payment), your mortgage lender, auto lender or credit card company can sell your account to whomever they please, or just assign the servicing rights to another company.

Often the sale or assignment is to a company whose methods are much less ethical than the one you have been doing business with. In 2002, the carmaker Mitsubishi brought in Systems & Services Technologies, Inc. to service its leases and loans, and many consumers were surprised by SST’s sharp practices. In other cases, mortgage lenders have sold their loans to companies like Ocwen or Fairbanks Capital, who seemed hell bent on driving the homeowner into foreclosure by “losing” payments and other tactics. In fact, in November 2003 the FTC made Fairbanks Capital disgorge $40 million it collected by failing to post consumers’ mortgage payments in a timely manner and charging consumers illegal late fees and other unauthorized fees. So in some cases your nonpayment is actually their game-playing. And the name for their game-playing is “loan servicing fraud.”

What can you do? Consumers CAN fight back. If the creditor or servicer itself won’t fix the situation, contact your state’s attorney general’s office, the attorney general’s office in the state where the servicer is located, and the Federal Trade Commission. If what the creditor or servicer is doing has caused you to be in a bind, you may need to contact a consumer attorney in your area. One good place to look for a list of them is .