Friday, July 6, 2007

Overzealous Debt Collection Contributes to Suicide

MacDermid v. Discover Financial, (6th Cir. 2007), is an extremely unfortunate example of the need for more stringent legislation in the area of debt collection.

Intentional infliction of emotional distress is more than merely a byproduct of bad debt collection practices; it is the avowed goal of many debt collection agencies. The most frequent bar to civil prosecution is whether the conduct is "outrageous," and -- although, as discussed by the Sixth Circuit in this case, the bar is set extremely high for what constitutes outrageous conduct -- debt collection agencies routinely engage in the most contemptible tactics that easily warrant civil censure.

The problem, however, is that overly-aggressive debt collection efforts are, by definition, directed at persons with financial difficulty. These victims, in turn, either lack the acumen to pursue legal remedies, or are otherwise dissuaded from pursuing redress by the nature of their circumstances.

Another problem facing these victims is a lack of sympathy for persons who fail to pay their debts. Each year, financial institutions earn billions of dollars on fees, sub-prime interest rates, default raters, and the like. An occasionally delinquent consumer can easily pay twice-over the principal on a credit card and have the entire sum swallowed by interest and fees. Often the legal remedies that could be sought by the creditor are intentionally delayed because a judgment, which could be collectible in a variety of fashions but yields perhaps 9% interest, is less profitable than letting the debt grow exponentially and then reaching a seemingly meager settlement.

It is counter-intuitive, but it is often extremely profitable for financial institutions to lend to people who they know cannot pay their debt. Then, in the event that the venture proves unprofitable, the institution will find some mechanism to shift the risk of loss to unsuspecting consumers. The sub-prime mortgage scandal is a perfect example.

When the creditor, rather than the debtor, is viewed as the victim, the threshold for what seems "outrageous" is drastically shifted.

Hopefully, this case will spurn efforts not only by lawyers, but also by psychological researchers. The psychological effect of debt collection is an area where there has been unfortunately little study. In this case, the debt collection efforts exacerbated an already existing condition, one that seems to have been rather severe. Poor financial management, however, is a frequent symptom of psychological illness and Mrs. MacDermid's situation may not be all that rare. Furthermore, it is entirely possible that aggressive debt collection efforts may trigger depression and other psychological difficulties in persons who are otherwise mentally healthy, thus imprinting a sense of defeatism and complacency that significantly worsens the financial trouble which caused the debt collection efforts in the first place.

1 comment:

  1. The 6th Circuit decision was denied by the Nashville District again on 5-28-8 (Doc. 144). The case is back to the 6th Circuit for appeal again. A five year denial of justice looks like six years to never. . It gives predatory lenders a license to kill!

    The pretext of this decision is identity theft. Lock step evidence of profile solicitation with contemptuous issue and baiting by dropping three individual cards in the target's name, and surreptitiously issuing accounts in the spouse's name to create illusions of ID theft, with expectations of predatory fees and penalties ... is ignored in the decision!

    The pretext of the decision is claims by Discover in Docs. 131, 131-2, and exhibits A, B, & C. How can there be a fraudulent binding agreement by their target, where there is no documentation of agreement? (Look at the exhibits!) How can there be misrepresentation and fraud by the "target", when the target agreed to do nothing in their name or anyone else's name! Discover’s target did document their own legal information and all information required by Discover to be an "AUTHORIZED BUYER"? Have the courts completely eliminated the essential elements of agreement and binding contract?

    What is perjury? Does it include swearing by oath and affidavit to the creation of documents Ms. Kokoszka "found", but had no part in creating; and falsely claiming witness to acts by a “target” she never saw or engaged in communication? Does it include a sworn affidavit exhibit that is in a direct three way conflict with other Discover’s sworn material statements of fact, records, motions, and exhibits directly relating to denial of justice in the first dismissal and the recent second dismissal by the same judge and court?

    There are no inalienable rights of Constitution and due process when trial by jury can be denied! Are we dulcified into believing the assumption and enforcement of power and oppression by predatory lenders is greater than our birthrights? The entire text of Article VI causes 2 and 3, plus Amendments IV, V, VI, VII, XII, and XIV can be printed on an 8 ½ sheet of paper. Copy it and hold it in your left hand as you read the (Docs.) as noted, and the FTC ID theft affidavit instructions & samples! We are letting the acts and precedence of man overrule our birthright and gift of God!

    Updated other related information is on other blogs: mentalhealthnotes,CL&P Blog, SC Bankru[tcy, overlawyered.