The following is excerpted from my upcoming book, and companion piece to HT Credit Solution about debt collection entitled HT Collection Solution.
The Fair Debt Collection Practices Act (FDCPA) (15 USC 1692 et seq.), which became effective in March 1978, was designed to eliminate abusive, deceptive, and unfair debt collection practices. It also protects reputable debt collectors from unfair competition and encourages consistent state action to protect consumers from abuses in debt collection. Which leads to a little-known fact that this law was designed to protect debt collectors. Most people assume that the reason Congress passed the FDCPA was to protect consumers from abusive debt collectors. This is one of the two reasons this is correct. But the other reason often surprises consumers — Congress wanted to protect debt collectors. But not just any debt collectors. Honest, ethical, law-abiding debt collectors.
READ: Bad Personal Credit
Let’s look at some infractions and the law that references the changes in debt collection since 1978, commonplace in the “Bad Old Days” before the FDCPA.
Legal Infractions & References
- Ask you to pay more than you owe. The collector cannot misrepresent the amount you owe. [15 USC 1692e] § 807(2)(a).
- Ask you to pay interest, fees, or expenses that are not allowed by law. The collector can’t add any extra fees that your original credit or loan agreement doesn’t allow. [15 USC 1692f] § 808(1).
- Call repeatedly or continuously. The FDCPA considers repeat calls as harassment. [15 USC 1692d] § 806(5).
- Use obscene, or abusive language. Using this kind of language is also considered harassment. [15 USC 1692d] § 806(2).
- Call before 8:00 am or after 9:00 pm. Calls during these times are considered harassment. [15 USC 1692c] § 805(a)(1).
- Call at a time the collector knew or should know are inconvenient. Calls at these times are considered harassment. [15 USC 1692c] § 805(a)(1).
- Threaten action they cannot or will not take. Collectors can’t threaten to sue or file charges against you, garnish wages, take property, cause job loss, or ruin your credit when the collector cannot or does not intend to take action. [15 USC 1692e] § 807(5).
- Use or threaten to use violence in you don’t pay the debt. Collectors can’t threaten violence against you. [15 USC 1692d] § 806(1).
“Debt collectors like to play on your emotions because they think you’ll give in and do something you can’t really afford to do. Most of them don’t care about you or your situation as long as they get some money.” ~Dave Ramsey
- Illegally inform a third party about your alleged debt. Unless you have expressly given permission, collectors are not allowed to inform anyone about your debt except: your attorney, the creditor, the creditor’s attorney, a credit reporting agency, your spouse, your parent (if you are a minor). [15 USC 1692c] § 805(b)
- Repeatedly call a third party to get your location information. The collector can only contact a third party once unless it has reason to believe the information previously provided is false. [15 USC 1692b] § 804(1).
- Contact you at work knowing your employer doesn’t approve. A collector is not allowed to contact you at work if you’ve let them know your employer doesn’t approve of these calls. [15 USC 1692c] § 805(a)(3).
- Fail to send a written debt validation notice. Within five days of the collector’s initial communication, it must send you a notice include the amount of the debt, the name of the creditor, and notice of your right to dispute the debt within 30 days. [15 USC 1692g] § 809(a).
- Ignore your written request to verify and debt and continue to collect. A collector can’t continue to collect on a debt after you’ve made a written request to verify the debt as long as the request was made within 30 days of the collector’s written notice. [15 USC 1692g] § 809(b).
- Continue to collect the debt before providing verification. After receiving your written dispute, the collector must stop collecting on the debt until they have provided, and you have received verification. [15 USC 1692g] § 809(b).
- Continue collection attempts after receiving a cease communication notice. When you make a written request for the collector to cease communication, it can only contact you one more time, via mail to let you know one of the following: that further efforts to collect the debt are terminated, that certain actions may be taken by the collector, or that the collector is definitely going to take certain actions. [15 USC 1692c] § 805(c).
Even with the FDCPA on your side, dealing with debt collectors can be daunting and downright scary. Know your rights, as in all things. There is a lot of misinformation about debt collectors, how to deal with them, and what they can and can’t do when collecting a debt. Unfortunately, believing the widespread myths about debt collectors can damage your credit, put you at risk of a lawsuit, or even lead you to pay a collector money you don’t owe.
Get the facts about debt collectors and the truth behind these common debt collection fables.
Debt Collection Reality
1. Debt collectors are always right. You can never assume that a debt collector is calling you for a legitimate debt. Sometimes debt collectors get the wrong information. Sometimes, dishonest debt collectors pursue consumers for bogus debts or debts that have long been paid or canceled. Fortunately, you use the debt validation process to demand that collectors send proof of your debt before you pay. It’s a good idea to request debt validation before you pay any debt collection.
2. The debt will go away if you just ignore it for long enough. If ignoring debts made them go away, none of us would ever pay up. Debt collection calls and letters may stop if you ignore a debt long enough, but the debt doesn’t go away. It continues to be listed on your credit report until the credit reporting time limit is up. Even after the debt falls off your credit report, it likely still exists in your creditor’s records. If you try to get an account with that business again, you’ll have to clear up the unpaid debt first.
3. Sending a “cease and desist” letter makes the debt go away. A “cease and desist” letter stops debt collectors from calling you. That’s it. Your debt remains even after the debt collector’s calls to you stop. The debt still listed on your credit report will still affect your credit score and ability to get approved for credit cards and loans. The debt may even be assigned to a new collector. If that happens, your previous “cease and desist” letter does not apply.
“Youth is in danger until it looks upon debts as furies.”
~Edward G. Bulwer-Lytton
4. Paying a debt collection will remove it from your credit report or raise your credit score. When you pay a debt collection, the debt collector is only required to update your credit report to show that you’ve paid it. They’re not obligated to remove it from your credit report after you pay it – because paying a debt collection doesn’t change the fact that you owed it. And while paying a collection is overall good for your credit and your financial health you may not see an immediate increase in your credit score after paying off the collection.
5. Paying or making a payment on a debt restarts the credit reporting time limit. Don’t worry. The debt collection won’t be listed on your credit report for longer just because you paid it. The credit reporting time limit is based on the date of delinquency on your account – which is the same date even after you make a payment. The collection will fall off your credit report after seven years whether you pay it or not.
6. Debt collectors can’t sue on debts that have passed the statute of limitations. While the statute of limitations is technically the time limit that a debt is legally enforceable, that doesn’t necessarily mean a debt collector won’t sue you after the statute has expired. Some debt collectors are dishonest and don’t always follow the law. They may re-age the debt or sue you in hopes that you can’t prove the statute of limitations has passed or perhaps that you won’t respond to the lawsuit at all. This is why it’s important to keep your records for your debts.
“A man in debt is so far a slave.”
~Ralph Waldo Emerson
7. Debt collectors have to stop calling you if you tell them to stop. This is only partially true. Verbally telling the debt collector to stop calling you only works in two instances. First, when you tell the collector to stop calling you at work because your employer doesn’t allow you to receive these phone calls, the debt collector must stop calling you at your job. Second, if you tell a collector they’re calling at an inconvenient time, they can no longer call you at that time. You must make a written request to have a debt collector stop calling you completely. Otherwise, the debt collector isn’t legally obligated to honor a verbal request to stop calling you.
8. Making a partial payment will get the debt collector off your back. Your debt obligation is due in full. Debt collectors may stop calling you temporarily if you make a payment on the debt, but calls will resume eventually. Making a payment according to a payment arrangement may stop collection calls completely as long as you keep up with all your payments under the arrangement.
9. Settling the debt for less than the full balance due will help your credit score. Debt settlement is sometimes a good strategy for taking care of negative accounts, but it doesn’t help your credit score. The best you can hope for is that settling the debt won’t affect your credit score at all. Settling won’t help your credit score – not right away at least. Having a zero balance on a collection is better than having an outstanding collection, but only time and positive payment history will help your credit score improve.
“Make this the year you tackle that credit card debt
once and for all.”~Suze Orman
10. Debt collectors can put you in jail if you don’t pay your collection. Debt collectors do not have the authority to put you in jail for consumer debts. It’s even illegal for debt collectors to threaten to have you arrested over debts if they know they do not have the authority to do this. In some states, however, you could be arrested for certain types of debts like overdue child support or for failing to appear in court for a hearing related to the debt.
11. You can bypass the debt collector and pay the original creditor. Most people would rather pay the company they created the debt with rather than a third-party debt collector. However, you may not have that option depending on the creditor’s arrangement with the debt collector. Often, the original creditor has a contract with the third-party collection agency that prevents the creditor from accepting payment for your debt. In some cases, the original creditor has sold the debt to a debt buyer who now owns the debt outright.
12. Debt collectors can garnish your wages if you don’t pay. Debt collectors and most other businesses have to follow a certain legal process to garnish your wages for consumer debts. They must first sue you and win a judgment against you. Then, if you do not pay the judgment, the debt collector can go back to court and ask for permission to garnish your wages. You shouldn’t be blindsided by garnishment unless the debt collector has used the wrong address to have your legal notices served. If that happens, your attorney may be able to have the judgment overturned because you were not served at the right address.