November 28, 2013
Tips for Dealing with a Debt Collector
1. Know how the collection process works. Why are you being contacted by a collection agency? It usually means that a creditor has not received payment from you for several months. They have negotiated with another company or are using an in-house affiliate called a debt collector to attempt to get you to pay. Third party collectors often purchase your debt for less than you owe, and your debt is now owned by the collector. A collector may also work for the creditor in return for a fee or a percentage of any money collected. In-house collectors that are affiliated with the original creditor work on behalf of the company directly. Because the creditor has taken a loss on your account or because you are late with making payments, this negative information may show up on your credit report.
Another reason a debt collector may be contacting you is that an imposter has used your identity to obtain credit, a crime known as identity theft. You are not responsible for the debt, but you may experience difficulties convincing the debt collector of this. Under federal law, the debt collector has certain responsibilities in investigating your situation and may be liable for failure to cooperate. We discuss identity theft in Part 8.
2. Know your rights. Learn to recognize abusive collection practices. Even if you owe a debt, a collector owes you fair treatment and respect for your privacy. Also, be aware that even if the collector's conduct does not exactly match the language of the federal Fair Debt Collection Practices Act, that collector may still be liable for its conduct. We explain your rights under federal and state laws in Parts 2, 3 and 5.
3. Ask questions and learn specifics. Often the first contact with the debt collector is a telephone call from a representative, a pre-recorded message asking you to call a mysterious toll-free number, or a letter. When a collector calls or you call back, get as much information as possible. Ask for the name of the caller, the collection agency, the creditor, and the address and fax number for sending correspondence. Also ask about the amount the collector claims you owe. In this first call, you should also tell the caller you expect written follow-up if you have not yet received a notice in the mail. For information about how to correspond with a collector or complain to a government agency, see Parts 6 and 7.
4. Assert your right to privacy . If your first contact with a collector is by telephone, tell the caller that you want all future contact in writing rather than by phone. You can also instruct the collector not to call you at work or at all if that is your choice. Make notes of your first conversation and start to keep a file. See Item 5 of this section. It is important to follow up on such requests in writing right away. Your letter should include requests about contact or other matters discussed in your first telephone contact. Note: If you notify the collector not to contact you at all, it is entitled to contact you one more time to explain how it intends to proceed.
Also you should tell and write the collector that you are the only person to be contacted. Since the agency is well aware of your location, there is no need to contact your employer, neighbors, relatives, or friends to find out where you are. If you are an employer, friend, neighbor, or family member who is being contacted by a collector, you can write the collector and tell it to stop contacting you. See Parts 3 and 6 for more privacy protection tips.
5. Start and keep a file. At the first contact from a collection agency, start a file. Your file should include:
Dates and times of phone conversations, pre-recorded messages the collector leaves on your voice mail, and when you send or receive correspondence.
Notes of conversations along with the name of the collection agency employee.
Copies of correspondence you send, as well as those you receive including envelopes. Collectors are supposed to give you written notice of the collection action five days after you are contacted by phone.
Copies of messages that are abusive or overly intrusive.
There is no set time after which you will never be contacted again about a debt. Some debts are sold to other collectors even after being properly disputed. Keep all records regarding disputed debts indefinitely in case the debt comes back to haunt you, and you need to dispute it again.
6. Put it in writing. Send any correspondence, including disputes, to both the collection agency and the creditor by Certified Mail, Return Receipt Requested. When in doubt, send a written confirmation of anything that you may need to prove later (for example, a promise or threat made, a rude or harassing comment received, or an explanation given you that may show improprieties in the handling of your dispute or your payments). See Parts 6 and 7 for tips on corresponding with collectors, government agencies, or collector associations about abusive practices. Also, see the Sample Letters in Attachment B. The Consumer Financial Protection Bureau (CFPB) also has sample letters available at http://www.consumerfinance.gov/blog/debtcollection/
7. Clarify payments. If you negotiate a repayment plan over the phone, ask the representative to send you the terms of the plan in writing. You may also write a letter that explains your understanding of the negotiated repayment plan. Payments made to a debt collector when multiple debts are involved should clearly specify to which debt the payment is to be applied. It is possible to dispute one debt, but agree to pay another. Also, any promise to remove or adjust reports in your credit history should be documented for later enforcement.
8. Pay the proper party. Payments should be made to the debt collector and not the original creditor unless you are expressly instructed to pay the creditor directly. In this case, you should confirm such instruction in writing to both the creditor and the debt collector.
9. Don't be coerced. Never pay a bill you don't owe just to get the collector to "go away." Any payment of the debt is considered an acknowledgement that you are responsible. Even if you pay, that will not erase a negative entry on your credit report. See Parts 6 and 7 for information on how to notify collectors in writing about a variety of situations in which they might be attempting to coerce payment.
10. Examine balances, interest charges, and other fees and charges. Carefully review the amount you are being asked to pay. You should ask the collector to tell you the amount of the original debt as well as give you a breakdown of any interest, fees, or charges that have been added. Federal law prevents a debt collector from charging you any more than the amount you actually owe, if not permitted by the laws of your state or the terms of the original agreement with the creditor. (15 USC § 1692(f))
11. Complain about abusive collection practices. Under the federal FDCPA, a collector is not allowed to make idle threats, express or implied (for example, "We must get your payment no later than the day after tomorrow"), or use abusive or profane language. A collector should not discuss your account with third parties or use the phone to harass you. Your state may also have a law that sets standards for debt collectors (see Part 5). For tips on how to complain to authorities about abusive practices, go to Part 7.
12. Military members should make an appointment with the local Judge Advocate General's office if contacted by a collector. The Servicemembers Civil Relief Act (SCRA), previously the Soldiers' and Sailors' Civil Relief Act (SSCRA), provides protections for military members whose financial life is affected by military service. Visit http://www.americanbar.org/content/dam/aba/migrated/legalservices/lamp/downloads/SCRAguide.pdf for more information.
13. Don't be fooled. Be wary of advertisements that promise an easy solution to debt. Debt repair "doctors" and credit consolidators may end up causing you more harm than good. Also, federal and some state statutes have "credit repair organization" acts that may limit the amount that you can be charged and when you can be required to pay such charges, even if the person you consulted is an attorney. These laws were enacted because of the number of people who preyed on the public's ignorance by charging them to do what the person was fully empowered to do themselves. Violation of these acts may even constitute criminal activity, and be the basis for the suspension or revocation of the individual's license. Read the FTC's publication, "Ads Promising Debt Relief May Be Offering Bankruptcy," www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt015.shtm. The FTC also offers tips for how consumers can help themselves. www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm
14. Seek help, but be careful. Seek assistance in resolving your debt(s) through a member agency of the National Foundation for Consumer Credit, such as the Consumer Credit Counseling Service. This national organization can help you locate an affiliated counselor in your area (see References, Part 11). Do not agree to any payment plan until you have confirmed the credentials of the counseling service. Some charge excessive fees. Before you decide to work with a counselor, check with the Better Business Bureau, www.bbb.org. For additional tips on mortgage and debt relief services (and avoiding debt relief scams) see www.consumerfed.org/pdfs/Get-Real-Debt-Help. For information on specific debt-related topics, see: www.ftc.gov/bcp/menus/consumer/credit/debt.shtm
15. Seek legal help. Some situations may call for the assistance of a consumer lawyer. You may sue in state or federal court within one year of violation of the law. Look for an attorney with expertise in the FDCPA and other relevant federal and state laws, and with a proven track record.
16. Don't ignore a collector even if the debt is not yours. It is in your best interest to respond to a collector immediately. Delay can mean the collector will continue to contact you. The collector may even file a lawsuit and get a judgment against you. The result can cost you more time and trouble in the long run.
17. Ask questions about an old debt. Many states have a statute of limitations that limits the amount of time a debt collector has to file a lawsuit. A debt that is older than the state law allows for a collector to sue you is said to be "time barred." This does not mean, however, that a debt collector can't attempt to collect the debt. According to the Federal Trade Commission, a state's statute of limitations may be as long as ten years but is usually three to six years.
To learn more about old debt and what you can do, see the FTC's publication entitled, "Time-Barred Debts": Understanding Your Rights When it Comes to Old Debts": www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt144.shtm
18. Be aware of possible fake collectors. Be on the alert when a caller claiming to be a debt collector asks you for your Social Security number or information about your bank and credit card accounts. The caller may be a fake who may even goes so far as to threaten you with jail.
To learn more about fake debt collectors, see the FTC's publication entitled, Who's calling? That Debt Collector Could Be a Fake": www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt076.shtm
2. Fair Play under the FDCPA
The federal Fair Debt Collection Practices Act (FDCPA) sets the national standard for collection agencies. The FDCPA, enforced by the Federal Trade Commission (FTC), prohibits abusive collection tactics that harass you or invade your privacy. (15 USC §§1692-1695) The full text of the FDCPA is found at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
The Consumer Financial Protection Bureau (CFPB) enforces the FDCPA in coordination with the FTC. The CFPB, a government agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 11-203, Sec1089, 124 Stat. 1376 (2010) ("Dodd-Frank"), issued its first report to Congress in March 2012 outlining efforts to enforce the FDCPA in coordination with the FTC. To read this report, go to: http://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf.
In January 2013, CFPB issued final rules allowing it to regulate debt collectors with $10 million in annual receipts from consumer debt collection activities. http://files.consumerfinance.gov/f/201210_cfpb_debt-collection-final-rule.pdf. You can read a summary of these rules at http://www.ballardspahr.com/alertspublications/legalalerts/2012-10-25-cfpb-issues-final-debt-collection-larger-participant-rule.aspx.
Generally, the FDCPA only applies to agencies that collect debts for others. However, other federal or state laws may apply to in-house debt collections. For more on debt collections not covered by the federal law, as well as collection laws in California and other states, see Parts 4 and 5 and Attachment A of this guide.
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