Schumer says 'zombie debt' is all trick and no treat
Sen. Charles Schumer (D-NY) is proposing legislation to combat an increasing number of debt collectors who are harassing consumers over debt they no longer owe or have resolved through the bankruptcy process.
In 2014, more than 2,400 upstate New Yorkers, including nearly 200 from central New York, filed complaints with the Consumer Financial Protection Bureau (CFPB) about "zombie debt" that is still haunting them. Schumer called the collectors debt scavengers.
"They purchase allegedly uncollected debt from banks for pennies on the dollar and then try to harangue unwitting consumers into paying it in full," Schumer said.
According to CFPB data, the largest amount of debt collection complaints filed, 37 percent, concern zombie debt. Schumer said currently, creditors are under no obligation to ensure a consumer's balance reflects the removal of false or old debt in a timely fashion. He said that can have costly repercussions.
"It hinders your ability to pay for a mortgage or get one with favorable rates," Schumer said. "The same for car loans or a loan to start a new business. You can even be denied a job for having poor credit history - all because of false information."
Schumer's bill, the Consumer Reporting Fairness Act of 2015, would require banks and debt collectors to inform credit reporting agencies about resolved debt. If the credit reporting agencies don't reflect that new debt balance in a timely fashion, consumers can sue.