Your Rights when Dealing with a Collection Agency
Last Updated October 24, 2008
If your credit problems have progressed to the point where your creditors have turned your case over to collection agencies, it is important to know your legal rights.
Collection agencies are not allowed to:
- Call your office;
- Call your home before 8 a.m. or after 9 p.m.;
- Address you in an abusive manner;
- Call family or friends in an attempt to collect your debt;
- Harass you;
- Make false or misleading statements; or
- Add unauthorized charges.
If any of the above is happening to you, tell the collection agency to stop harassing you. If it continues, ask for its name and address and report it to the Better Business Bureau, the Federal Trade Commission (see below), or your state's attorney general's office. The federal Fair Debt Collection Practices Act also states that you can demand that the collection agency stop contacting you, except to tell you that collection efforts have ended or that the creditor or collection agency will sue you. However, you must put your request in writing.
Please note: The FDCPA applies only to bill collectors who work for collection agencies, not the original creditors. You will not be able to get the collection department in your credit card company to stop calling you with a letter. Only New York City has a local consumer protection law that requires the original creditor to stop calling you after a written request to do so.
What happens if the collector breaks the law?
If a bill collector violates the FDCPA, try and see if you can get the illegal behavior on tape. Taping is permitted without the collector's knowledge in all states except CA, CT, DE, FL, IL, MD, MA, MI, MT, NH, PA, and WA. At the very least, record everything the bill collector says in some form of a written log. Be sure to include the dates of the conversations. The next step is to file a complaint in writing. You can even file a complaint if you don't have a witness to any of these conversations, but a witness helps. The correct agency to file your complaint with is the FTC. You can even file a complaint online:
Federal Trade Commission
6th Street & Pennsylvania Avenue NW
Washington, DC 20850
202-326-2222
http://www.ftc.gov
Next, complain to your state consumer protection agency. Then send a copy of your complaint to the creditor who hired the collection agency. If the violations are severe enough, the creditor may stop the collection efforts.
If the violations are ongoing, you can sue the collection agency (and the creditor that hired the agency) for up to $1,000.00 in small claims court for violating the FTC regulations (note: you probably won't win if you can prove only a few minor violations). If the violations are outrageous, you can sue the collection agency and creditor in regular civil or small claims court.
Common Collections Tactics and Rebuttals
Some collection agencies do employ collection methods involving the use of false and misleading statements. Just like any other high pressure salesman, these guys will make lots of "helpful" suggestions to get you to close the deal NOW. They will always try to get you to pay up right then and there. Some examples:
- insist you FedEx or Express your check to them (Can you really afford to add $12 to the debt you already can't pay?)
- Charge it on your credit card. (Sure, charge up the old card - isn't this how you got into trouble in the first place?)
- They will try to get you to pay by "telecheck". This means you give them your checking account number, and they deduct the amount electronically. Are you crazy? NEVER give out your checking account and check routing numbers.
While the FDCPA allows a collector to add interest if your original agreement calls for the addition of interest during collection proceedings, or the addition of such interest is allowed under state law, it is not necessary to spend the money or risk your checking account for any of the above methods. The three or four days it may take to mail a payment with a first class stamp, if they do decide to come after you for interest, won't break the bank.
What if I can't pay?
It is generally in your best interest to settle your debts as quickly as possible, or use the debt validation techniques outlined here, or by settling your debts. Before obtaining a court judgment, a bill collector generally has only one way of getting paid: Demand payment by calling you and sending you threatening letters. If you refuse, the collector can't do much else short of suing you. Once the collector (or creditor) does sue and gets a judgment, however, you can expect more aggressive collections actions:
- If you have a job, the collector will try to garnish up to 25% of your net wages.
- The collector also may try to seize any bank or other deposit accounts you have.
- If you own real property (real estate), the collector will probably record a lien, which will have to be paid when you sell or refinance your property.
Some collection agencies will agree to settle with you for far less than you owe and then turn around and hire another collection agency to collect the difference. However, in many states this is illegal. Once a creditor deposits or cashes a full payment check, even if she strikes out the words "payment in full," or writes "I don't agree" on the check, she can't come after you for the balance. The states in which this law is enforced include:
| Arkansas | Colorado | Connecticut | Georgia |
| Kansas | Louisiana | Maine | Michigan |
| Nebraska | New Jersey | North Carolina | Oregon |
| Pennsylvania | Texas | Utah | Vermont |
| Virginia | Washington | Wyoming | |
Some states have modified this rule. In the following states, if a creditor cashes a full payment check and explicitly retains his right to sue you by writing "under protest or without prejudice" with his endorsement, then he can come after you for the balance. But those exact words must be used. If he writes "without recourse," communicates with you separately, notifies you verbally, or writes on the check that it is partial payment, it is not enough.
| Alabama | Delaware | Massachusetts | Minnesota |
| Missouri | New Hampshire | New York | Ohio |
| Rhode Island | South Carolina | South Dakota | West Virginia |
| Wisconsin | | | |
Feel like you're now fully awayre of your rights? Play the "Spot The Collection Agency Violations" game!
Other articles on collection agencies:
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