Debt collectors make their money by successfully getting you to pay your debt, often with threats that are not even allowed by law. If you find yourself in a situation where debt collectors are hounding you, it’s important to know the rules that govern their conduct in order to deal with them effectively.
The Fair Debt Collection Practices Act determines the rules for many kinds of collections efforts including dishonored checks, rent, medical bills, utility bills, insurance bills and claims, student loans, credit cards, condo fees, attorney’s fees, judgments, and other personal debts.
Some collectors are excluded from the Act, however. These include creditors who are collecting on their own debts, service companies that have been assigned the debt (this does not include collection agencies), government employees, business creditors and non-profit credit counselors.
While these collectors are excluded from the Federal Act, many states, such as California, set stricter rules and hold all collectors under the rules set forth in the FDCPA.
So, basically all debt collectors must follow these rules:
- Debt collectors can only contact you between 8 AM and 9 PM.
- Debt collectors cannot contact you at work if you’ve let them know that your employer disapproves of the contact.
- Debt collectors cannot harass, oppress or abuse you.
- Debt collectors cannot lie when collecting a debt. (e.g. you can’t be told it’s a crime and that you’ll go to jail).
- Debt collectors must identify themselves when they call.
- Debt collectors must stop contacting you when you ask them to stop in writing. [This is known as a cease and desist letter, but be careful when you use it. If you stop the debt collector from contacting you, his only other means of collecting the debt is through a lawsuit.]
- Debt collectors do have the right to contact your neighbors, but they can only ask where you are and they can only call once. They do not have the right to tell neighbors anything about your financial situation.
- Debt collectors can only discuss your debt with your attorney, the creditor’s attorney, a credit reporting agency, a co-debtor, a guardian, or a parent. They cannot talk to any other third party about your debt.
One of the most common threats you’ll hear from debt collectors is that they’ll take you to court. They actually break law when they do that if they have no intention of actually suing you, they aren’t planning to do so in the immediate future, or they haven’t been given the right to sue.
For example, many states forbid lawsuits by collections agencies. If a collector threatens you with a lawsuit, don’t get scared, but do consult a lawyer to find out what your rights are in your state. The lawyer can tell you if the collector has a right to sue and whether the statute of limitations for your debt has expired or not.
The biggest mistake you can make when being hounded by a debt collector is to make a small payment in the hopes they’ll go away. Don’t start paying on a debt unless you plan to pay it off completely or negotiate a debt settlement that will end all collections. If you do plan to try to negotiate a debt settlement be sure to finalize that agreement in writing before making any payments.
Additionally, be conscious of how debt collectors report your debt to the major credit bureaus. Debt collectors often intentionally misreport the age of your debt in order to leave the option for a lawsuit available. If you believe that your debt has been falsely represented, send proof to the credit bureaus.
Negative information about debt can usually only stay on your credit report for seven years after you first became delinquent, and the credit reporting agency must show the actual month and year that this occurred. If a more recent date is shown on your credit report, be sure to correct it.
When collectors violate the provisions of the Fair Debt Collection Practices Act they are subject to civil penalties of $2,500 per violation. So if you are being harassed by a debt collector who’s breaking these rules, don’t just ignore the phone calls and letters. Contact an attorney who can help you sue for the civil penalties. Proof always helps such an endeavor, so keep the letters you receive. Do some research before recording phone calls though, because many states have laws against recording conversations without the other party’s consent.
[Disclosure: Some of the links within this article point to CardHub.com, which is owned by the same parent company as Wallet Blog.]