Nowhere is the notion of “Knowledge is Power” more important than in the realm of debt collection. The less knowledgeable someone is about a consumer’s rights under the law, the more assertive, persistent and annoying debt collectors can coax a delinquent borrower to repay an overdue obligation.
In this case, a little knowledge can go a long way. If you are being hounded by a collection agency, the most important thing you need to acquire is a thorough understanding of the Fair Debt Collection Practices Act (FDCPA) and its companion legislation, the Fair Credit Billing Act (FCBA).
Both statutes are part of the federal Consumer Credit Protection Act (CCPA). These laws outline the required and prohibited behavior of debt collectors, and they also stipulate the rights and remedies afforded to consumers who are the subjects of their collection efforts. In short, the laws protect consumers – and these are rights that collection agents prefer you not know.
In addition to a basic knowledge of the available legal protections available, it is also a good idea to understand how the collection industry operates, so that if you are in communication with a debt collector, you will be more able to separate their tactics from the truth.
Rule 1: You Don’t Have to Talk
The first thing debt collectors don’t want you to know is that there is no law that requires that you work with them at all, let alone even talk to them. They certainly don’t want you to know that if you send a cease and desist letter – one that says you no longer wish to be contacted about the debt – that collection agency must stop all of the calls and letters immediately. If they fail to stop, they will violate the FDCPA.
Rule 2: No Big Early Payments Required
Because most collection agencies work on a commission basis, it is not unusual for collectors to tell a debtor that he or she has to pay a large down payment on the owed amount. They may say that a hefty initial sum is required in order to prevent collection fees from growing, or that it is necessary to begin the process of eliminating the debt from their records.
What they don’t want you to know is that there is no such requirement. They merely want to get as much money upfront as possible to inflate their commission.
Rule 3: No Deadlines
Debt collectors also may tell you that there is a deadline for payment and threaten you with dire repercussions if the debt is not paid within the prescribed time frame. What they don’t want you to know is that there is no such thing as a deadline. It is a complete fabrication, one designed to get your to repay your debt as quickly as possible, because they know that the longer they have to wait to get paid, the less likely it is to ever happen.
Rule 4: Your Credit is Already Damaged
Collectors often exaggerate the consequences of delinquency and non-payment. Threats are illegal under the FDCPA, but suggestions that your credit score will suffer, or that your possessions may be seized, are simply scare tactics with nothing to back them up.
In fact, if your debt is in collection, your credit score has already been damaged and the potential loss of your possessions is pure fiction. What they don’t want you to know is that all they can really do is ask, cajole, and demand that you pay. The rest is bluster.
Rule 5: Don’t Give Up Personal Information
Sometimes, debt collectors will ask you for information – your bank account number, your Social Security number, where you work, references from friends and colleagues. Why? To put together a “financial statement” they need to work out any repayment plan.
They don’t want you to know that they are merely fishing for information that will help them find you if you move, sue you if you don’t repay, or get into your bank records. There is no financial statement, and you should never give out proprietary information to anyone – ever.
Rule 6: Collectors Can’t Cross State Lines
Debt collectors also don’t want you to know that they cannot pursue you across state borders to enforce a judgment levied against you by a creditor who sued you for non-payment and won. Transferring the judgment to another state is time-consuming and expensive and not likely to occur very often.
Rule 7: There Are Limits to Garnishment
Debt collectors don’t want you to know that there are limits on the amounts they can legally garnish from certain portions of your income, like salary, social security or pensions. For example, the maximum amount that can be taken from a paycheck is the lesser of 25 percent of your disposable earnings or the amount by which your wages exceed 30 times the federal minimum wage.
You can also file for complete exemption from wage garnishment, if you can verify that it will cause you or your family financial hardship to have any monies withheld.
Rule 8: There Are Options for Student Loan Debt
Debt collectors don’t want you to know that if you have student loan debt, while it still must be paid, you have the right, under the 1992 Higher Education Act, to set up a short-term payment schedule with the collection agency, requiring only “reasonable and affordable payments” – sometimes as little as $10 per month.
Successful completion of the student loan rehabilitation program (making nine out of 10 payments on time) takes the debt out of the collector’s portfolio and sends it back to the Department of Education. The collection agency loses its various commissions and bounties, and your loan is now being held under more favorable conditions.
Remember, high pressure tactics by bill collectors are used solely to scare or bully you into paying them. While it is still your responsibility to square all your valid and legitimate debts, you don’t have to endure illegal, harassing or irritating activities.
Arming yourself with the right knowledge can help free you from the frustration – and empower you.