If you have fallen behind on your payments and you owe money, chances are a debt collector or collection agency is calling you day and night. Debt collectors make a living attempting to recover money owed and they will apply the thumbscrews in an attempt to get consumers to pay them. As evident by an increase in consumer complaints seen by the FTC, debt collectors are willing to threaten and harass consumers in order to collect money. If you are being called by a debt collector, it is important you know your legal rights.
What Collection Agencies Are Not Allowed To Do When Collecting a Debt
As stated before, the FDCPA affords strict guidelines that debt collectors must follow when attempting to collect on a debt. The following practices are ILLEGAL:
- Call you at your place of employment
- Call your home before 8 am or after 9 pm
- Address you in an abusive manner
- Call your family or friends in an attempt to collect your debt
- Harass you
- Make false or misleading statements
- Add unauthorized charges
If any one of the above is happening to you, tell the collection agency to stop harassing you. If it continues, ask for their 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 Fair Debt Collection Practices Act also states that you can demand the collection agency stop contacting you, except to tell you that the 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 if the Collector Breaks the Law?
If a bill collector violates the FDCPA, see if you can record the illegal behavior. Recording a conversation 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
Next, complain to your state consumer protection agency and 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 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 Illegal Collection 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. Here are some examples of their underhanded tactics.
- Insist you FedEx a check to them
- Charge the balance owed on another credit card
- Try to get you to pay by electronic check
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 You Can’t Pay the Debt Collector?
It is generally in your best interest to settle your debts as quickly as possible or use our debt validation techniques. 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 debt collector does sue you and gets a judgment, however, you can expect more aggressive collections actions such as:
- The collector will try to garnish up to 25 percent of your net wages.
- The collector may also 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.
Circumstances to Watch Out For If You Do Settle Your Debt
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 they strike out the words “payment in full” or writes, “I don’t agree” on the check, they 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 they can come after you for the balance. But those exact words must be used. If they write “without recourse,” communicates with you separately, notifies you verbally, or writes on the check that it is a 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.
The bottom line when dealing with debt collectors is to know your rights and don’t fall for their scare tactics. Become familiar with the FDCPA guidelines and if you think you are being harassed, be sure to file a complaint against them with the FTC. We have a lot of other very informative articles on our site regarding debt collectors and collection agencies. Another great resource is our discussion board where you can ask questions for free and get a lot of great advice.