Whenever you are behind on your bills for a certain period of time or a certain dollar amount, you may be contacted by a debt collector. This individual usually works for a collection agency, a lawyer who regularly collects debts, or a company that buys debts from a third party and then tries to collect them. The job of the debt collector is simple—he wants you to pay the money you owe. These collectors, however, must follow laws established by the federal and state governments.
What federal laws cover debt collection?
At a national level, debt collection is governed by the Fair Debt Collection Practices Act (FDCPA). This law stops debt collectors from using unfair, abusive, or deceptive practices in their attempt to collect from you. It is enforced by the Federal Trade Commission (FTC), which is charged with protecting consumers.
The FDCPA covers personal, family, and household debts but not debts you incurred while running a business. In other words, the money you owe on your credit card, car loan, mortgage, and medical bills is all protected. In most instances, original creditors—the person or company you originally owed the debt to–can attempt to collect on their own debts and are not considered debt collectors. Consequently they are not required to follow the FDCPA rules, but most do.
Within five days after they first contact you, collectors are obligated to send you a written notice of how much you owe, the name of the creditor, and what to do if you do not believe you owe the money. If you are represented by an attorney in the matter, the debt collector must contact the attorney instead of you. Collectors can demand payment in full, and they are not required to accept partial payments.
As mentioned previously, debt collectors are legally prohibited from taking certain actions. These include harassment, making false statements, and conducting unfair practices:
Harassment. Debt collectors may not threaten violence, publish a list of debtors to “shame” them into paying, discuss the debt with third parties (except with credit reporting agencies, to locate you, and by court order), use obscene or profane language, or make repeated harassing phone calls. They cannot contact you before 8:00am or after 9:00pm, unless you agree to it. They also may not contact you at work if you have told them (orally or in writing) that you are not permitted to take calls there.
False Statements. Collectors are not allowed to claim you have committed a crime, impersonate a law enforcement official or anyone else, say they work for someone when they do not, or falsely represent the amount you owe. Legal papers that are sent to you must be disclosed as legal papers, and non-legal documents cannot falsely be called legal papers. In addition, debt collectors cannot threaten you with arrest if you do not pay your debt, and they cannot say legal action (seizure, garnishment, property sales, etc.) will be taken if it will not or if it would be illegal to do so.
Unfair practices. Debt collectors are prohibited from depositing a post-dated check early, contacting debtors by postcard, taking or threatening to take property unless it is legal to do so, or collecting any money on top of the amount owed unless the contract or state law allows that action.
By understanding your rights and obligations, you can make informed decisions about your debts. The full text of the FDCPA is available here: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
What state laws cover debt collection?
Many states offer additional consumer protection beyond the FDCPA. State debt collection laws must meet the minimums set by the federal government, but they can vary from state to state. In most cases you can find your state’s debt collection laws by contacting your state Attorney General’s office or going to their website. If you are still unsure of where to go, a useful resource is the list compiled by the Privacy Rights Clearinghouse here: http://www.privacyrights.org/fs/fs27plus.htm
Examples of topics that states may choose to legislate include the following: the definition of a debt collector, the requirements for certain contracts to be legal (such as a three-day buyer’s remorse period), the maximum debt limit, and the statute of limitations for lawsuits.
What should you do if debt collection laws are violated?
If you feel that a debt collector has committed an illegal practice, you should report that situation to your state Attorney General’s office and to the FTC. You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can award you a damages payment, whether or not you can prove that you actually suffered the damages. You may also sue a debt collector as part of a class action lawsuit. Keep in mind that even if a debt collector is found guilty, you still owe the debt.
