Not paying your bills doesn’t make them go away. If you want to learn that the hard way, try skipping your credit card or car loan payments for a few months.
When payments stop, lenders typically turn to collection agencies versed in making intimidating phone calls and sending attention-grabbing letters.
There are limits to how far those efforts to coax payment can go, and collection agencies that cross the line risk violating the federal Fair Debt Collection Practices Act (FDCPA). Collectors can’t call you in the middle of the night or make hollow threats over the phone. In fact, if you notify collectors in writing that you don’t want to be contacted, the law requires them to back off.
The Federal Trade Commission (FTC) uses the FDCPA to block debt agencies from using abusive, unfair or deceptive practices to collect from consumers. Though the law is clear, many collectors don’t play by the rules and complaints against them abound.
The Great Recession depressed housing prices, tanked investments and displaced millions of workers, many of whom were struggling before the economy stalled. Even as the economy rebounds, personal bankruptcy filings remain high in many areas, and credit card debts burden countless households.
Lenders want their money back, and often turn to independent collection agencies to pressure borrowers to make payments. The FDCPA applies only to debt collectors, who are defined as those who collect on debts owed to others. Collectors may be collection agencies, attorneys and companies that buy delinquent debt from creditors in order to collect.
The law does not apply to the original creditors, only to the collectors they hire or sell the debt to.
The FDCPA covers personal, family and household debts including credit cards, home/auto loans, retail refinancing and medical bills.
Notifying debt collectors in writing to stop contacting you is your right, and while it might make day-to-day living a little less stressful, it’s not a real solution. Creditors are still able to sue you if you fail to pay the debt, and they can contact you to let you know a lawsuit is coming.
Off-Limit Practices for Debt Collectors
Debt collectors are not permitted to contact you before 8 a.m. or after 9 p.m. They may not contact you at work if you tell them in writing that you aren’t allowed to receive calls during business hours.
They can also use letters, emails and text messages as long as they disclose that they are debt collectors. But no matter the means, they aren’t allowed to pretend they are someone else — say a lawyer or a government official — in order to harass, threaten or deceive you.
Under the FDCPA, debt collectors are barred from engaging in the following practices:
- Harassment – Debt collectors may not harass, oppress or abuse the consumer by using threats of harm, using obscene or profane language, or repeatedly contacting the consumer via telephone with the intention of causing an annoyance.
- False Statements – Debt collectors are forbidden from lying in an attempt to collect a debt. Some examples include falsely identifying themselves as credit reporting agency representatives, attorneys or government representatives, claiming that you have committed a crime or misrepresenting the amount you owe.
- Unfair Practices – Debt collectors may not engage in unfair debt collection practices by trying to collect interest or a fee beyond the total amount the consumer owes or the state law allows. If you give a collector a post-dated check as payment, they aren’t permitted to deposit the check early. Collectors aren’t allowed to threaten to take your property unless they can do it legally, and they’re barred from contacting you with a postcard.
- Misleading Threats – Debt collectors aren’t allowed to threaten consumers with legal actions that aren’t permitted or they don’t plan to pursue.
- Wage Garnishment – Debt collectors are not legally allowed to garnish wages or bank accounts without a court order. Such a judgment directs a bank or employer to turn over funds or wages in order to pay the debt. Even then, many federal benefits are exempt from garnishment, including Social Security, student assistance and military annuities.
- Misleading Correspondence – Debt collectors aren’t allowed to give false information about you to anyone — including a credit reporting agency — and they can’t send you anything that looks like a court or government document if it isn’t one. Conversely, they can’t lead you to think that papers they send you aren’t legal forms if they are.
Rules of Engagement
If you have a lawyer representing you in a debt matter, the collector must contact the attorney and not you. If you don’t have a lawyer, the collector can contact other people, but only to discover your address and phone number, or to find out where you work. The outside sources — often called third parties — can generally be contacted no more than once. While talking to a third party, the collector is prohibited from discussing your debt. Only your spouse and your attorney can be brought into that conversation.
Under the rules of the FDCPA, debt collectors are required to tell consumers about the debt they are attempting to collect by sending a written notice with the name of the creditor, the amount owed and instructions on how to repay the debt. This is called the validation notice and must be sent to the consumer within five days of initial contact.
After that, you have 30 days to contact the debt collector — also by letter — and give your reasons why you don’t owe the debt or why the amount is incorrect.
If the Debt Is Yours – If you’ve already paid it, be sure to include a copy of the cancelled check or bank statement. If you contest the amount of the debt, verification should include information about payments made, and interest and fees charged and/or waived.
If the Debt Stems from Identity Theft – Include a copy of the police report regarding identity theft. If you fail to respond within 30 days (known as the validation period) to dispute the debt, it will be assumed to be valid.
After receiving your letter, a debt collector may not renew attempts to reclaim the debt until it is verified, and proof of its legitimacy is sent to you. The verification must include the amount of the debt, the date it was supposedly incurred, the name and address of the original creditor if different from the current one, and proof that your account has been sold or assigned to the collection agency.
If the required information is not forthcoming, all attempts at collection must immediately cease.
Actions Consumers Can Take Under the FDCPA
If you believe a debt collector has violated the law, take action. You reserve the right to sue a collector in a state or federal court within one year from the date the law was alleged to be violated.
If you prove that you suffered damages like lost wages or medical bills as a result of illegal collection practices, a judge can order the collector to pay to cover the damages. Even if you can’t prove actual damages, the judge can order the debt collector to pay you as much as $1,000. A group of people can sue as a class and potentially recover as much as $500,000, or 1% of the collector’s net worth, whichever is lower.
Meticulous documentation is important when dealing with debt collectors. A log of phone calls, voicemails, text messages and letters can be persuasive evidence to a judge or jury. Taken together, the records can show a pattern of behavior.
The FTC advocates for consumers to prevent deceptive and unfair business practices. Many states have their own debt collection laws that may differ from and strengthen the federal Fair Debt Collection Practices Act.
Because of this, it is important to reach out to your Attorney General’s office to determine your individual rights under that law before pursuing legal action against a debt collector.
What if a Debt Collector Sues Me?
If you are sued in an effort to collect a debt, respond with your own lawsuit by the date specified in the court papers. This is important to preserve your rights.