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No protection against credit harassment

After 30 years of knowing nothing of her father, Marta Moraga received a call from a collection agency asking about his whereabouts.

The person who called explained that  Moraga’s father had an outstanding debt with the agency. Moraga replied that she knew nothing about him and ended the conversation.

The next day the phone rang again, and the same collection agency delivered a different message: Moraga had to pay her father’s debts or they would take her to court. Moraga, stunned and angry, cut off the call.

That was the beginning of a stormy credit harassment case that Moraga alleges caused her severe stress, anxiety and depression. No matter how many times she asked to be left alone, she received at least eight calls per day for six months, between anywhere from 6 a.m. until 11 p.m.

“I was desperate and didn’t know what to do,” said Moraga, a resident of Alajuela, northwest of San José. “I don’t have nice memories of my father, and the fact that someone would mention him every day caused me a lot of anguish.”

Tired of trying to persuade the collection agency to stop the harassment, Moraga filed a complaint before the Constitutional Chamber of the Supreme Court (Sala IV), which ruled in her favor in April.

In their resolution, the judges ruled that Servicios Transaccionales S.A. had to stop all calls to Moraga. They also determined that Moraga has the right to sue the company for damages for emotional harm.

“The representatives of the collection agency never accepted their responsibility,” Moraga said. “They insisted that I was looking for money, but they are the ones who started the calls.”

Contacted by The Tico Times, Rosa Mena, who is in charge of collections at Servicios Transaccionales S.A., declined to comment on the case on behalf of the company.

Lack of Laws

Moraga’s case illustrates a big hole in Costa Rica’s consumer protection laws: The country lacks general regulations to establish criteria for fair collection practices.

Currently, only credit card users have the legal tools to defend themselves if they are harassed by collection agencies, since implementation of the Credit Card Regulation System in March 2010.

Since this system went into force, complaints of harassment have started to slowly show up among the list of general complaints filed before the Economy Ministry’s Consumer Support Office.

“Before 2010, the concept of unfair collection practices was unknown to most consumers,” said Maricruz Núñez, head of the office. “But with the new regulations, people have started to come forward and report abusive phone calls or other illegal practices used by collection agencies.”

However, most consumers seem to remain unaware of their rights. According to data provided by Núñez, in 2010, 74 credit card holders filed complaints against their banks for contract violations. Only five of the cases are related to abusive collection practices.

“It is a good beginning, taking into consideration that before the 2010 regulation, abusive collection practices didn’t make up part of the law,” Núñez said.

However, such regulations protect only credit card holders, leaving all other users of financial services vulnerable to collection agencies.

According to Adriana Rojas, an attorney for the National Association of Free Consumers, which in recent years has been primarily responsible for defending banking service consumers, Costa Rica is severely behind in establishing ways to protect consumers effectively.

“Harassment from collection agencies is an urgent issue,” Rojas said. “Extreme collection practices cause the victim serious harm, such as insomnia, depression and a sense of helplessness.”

Emilio Soto agrees. After being threatened by a collection agent, he even bought  a gun.

“I was told I would be sorry for not paying,” said Soto, a resident of the western San José suburb of Escazú. “[The collectors] were disrespectful and insulted me several times as they demanded I settle my debts.”

“I was going through a difficult economic situation that had me really worried, and on top of that I had to deal with more than 10 calls a day on my cellphone,” Soto added. “Agents started to call my wife and told her that if we did not pay for the car, the bank was going to seize the house and we would end up living on the streets. My wife went into a severe depression that still affects her.

“Those were the worst four months of my life.”

Soto said he decided to meet with the collection agency. After he told them of his desire to file a lawsuit, the calls stopped. He added that the agency had incorrect information about his payment history.

Collect at Any Cost

Due to the lack of laws regulating collection practices, collection agencies will use any method to recover money for outstanding debts, as they receive a percentage of the total amount collected, Rojas said.

“Consumers are not protected,” she said. “Sometimes agencies use abusive methods to deliver good collection results, while banks and other financial institutions that contract their services sometimes do not realize how things are done.”

Banks may choose to sign the Universal Declaration of Banking and Financial Services User Rights, a document issued in Spain in 2005 that stipulates what is a good collection practice and what is not. So far, Banco Nacional and Banco de Costa Rica have signed the declaration. However, it is not mandatory for financial institutions to sign the document in order to offer their services.

“If someone is in a harassment situation, I recommend taking legal action from the very beginning,” Rojas said. “While many are unaware of the possibility of a lawsuit, it is the best remedy. People can also request a restraining order [with the Judicial Investigation Police] to stop the calls immediately.”

“There has to be some regulation soon to control collection agencies,” Soto said. “I think it is dangerous to put debtors against the wall so hard, because no one knows how they may react. A desperate person is capable of doing anything.”


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