Here’s What Debt Collectors Are Allowed to Do… and What’s Totally Illegal

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If you’ve got so many debt collectors calling and demanding money that you’re afraid to answer your phone, relief isn’t as hard to find as you might think.

Once you understand how debt collection works, you can use that knowledge to find peace as you do the hard work of getting debt-free.

It starts with understanding the law that governs the agencies that want your money: the Fair Debt Collection Practices Act. This has the rules for everything about how your creditors and debt collectors can communicate with you.

What’s in the Fair Debt Collection Practices Act?

First things first: It’s time you take back your phone. That’s one of the things the Fair Debt Collection Practices Act lets you do.

There’s no reason you should be afraid to answer to a debt collector. And just because you don’t have the money to pay back what you owe as quickly as a debt collector would like, that doesn’t mean you have to suffer through a barrage of guilt-inducing calls.

The act allows you to slow or stop those annoying calls. Not only that, but it lets you dictate how debt collectors communicate with you. You can request that they only email you or mail physical notices to you.

You can even stop communication altogether and cut all ties to your debt collector. However, you may not want to take things that far, according to Bruce McClary, from the National Foundation for Credit Counseling.

“When you request to have communication completely cut off and you just want to drop off their radar, that sends them a signal that you have zero intention of paying ever, and it may accelerate some of their actions in trying to recover the debt in other ways,” McClary told The Penny Hoarder.

The point is that you have options beyond simply dodging debt collectors until you can find the money to pay. Other protections provided by the Fair Debt Collection Practices Act include:

  • Debt collectors are required to provide proof that you owe the debt.
  • They can’t call you before 8 a.m. or after 9 p.m.
  • They can’t call you at work if you tell them it could put your job in jeopardy.
  • While it’s legal for them to call a family member or friend to find you, a bill collector can’t give them details about your debt. And according to the CFPB, they can only call each family member or friend one time in most states.

Now that we’ve established that, let’s get a better understanding of those people who won’t stop calling you and what they do all day.

Everything You Need to Know About Debt Collection Agencies

When most of us talk about debt collectors, we’re not talking about employees of the bank or credit card company that initially extended the credit or provided a loan. Instead, we’re referring to people who work for a third-party company that regularly collects debts owed to other creditors.

By the time a third-party debt collection agency gets involved, the bill is usually past due.

Although that is the most common kind of debt collector, most financial institutions also have internal debt collectors. They usually work with borrowers who have recently become past due. Their goal is to help you get current quickly.

If they fail, your debt is often moved to the third-party collectors. If that company also can’t get you to pay up, your debt can move on to a third kind of collection agency: debt buyers.

According to ConsumerAffairs, debt buyers pay creditors a fraction of what you owe and then come after you for the full amount. Debt that has been sold to a buyer has usually gone unpaid for an extended period.

All three kinds of debt collectors — internal, third party and debt buyers — must follow the rules set by the Fair Debt Collection Practices Act.

According to the Federal Trade Commission (FTC), the world’s largest third-party debt collector is Expert Global Solutions.

However, it’s worth noting that no matter how big the company is, it’s not above the law laid out in the Fair Debt Collection Practices Act. The FTC forced Expert Global Solutions to pay a $3.2 million fine in 2013 after it was accused of harassing debtors with illegal collections calls.

How to Deal With a Debt Collection Agency, Step by Step

When it comes time to deal with debt collection agencies, the most important thing to note is that you shouldn’t ignore them.

That could lead to a gut punch to your credit score, a possible lawsuit that forces you to pay the debt and — if you still don’t pay — wage garnishment. That means, with approval from a judge, the creditor that you owe could take money out of your paycheck before it even gets to you. If you’re already on a tight budget, this will surely make things worse.

So what should you do if you owe debt? Here’s a step-by-step guide:

Step 1: Ask the Debt Collector to Verify That the Debt Is Yours

The Fair Debt Collection Practices Act requires a debt collector to prove that you really owe the debt. That can be done with documents from the original creditor that show how much you owe and when you accepted the loan or credit.

Step 2: Take Control of the Communication Process

If the calls are incessant and you want them to stop, be sure to request the change in writing. This can be via email or a physical letter. The Consumer Financial Protection Bureau provides a series of template letters to help you communicate with debt collectors in writing.

Step 3: Keep Detailed Records

It’s important to remember that debt collectors have a job to do. They are not your allies. It’s up to you to keep track of every letter, email and phone call.

You have a right to record phone calls with debt collectors; just make sure you notify them before you start recording. If they refuse to be recorded, hang up and reach out via email instead so that everything is in writing. If you forget to record a call, keep detailed notes about what you discussed. This will come in handy if you ever need to file a complaint against an abusive debt collector or have to fight in court to prove that the debt isn’t yours.

Step 4: Work With a Credit Counselor

Figuring out how to start repaying a mountain of debt can be daunting. Finding expert help can make the process a little easier. The Department of Justice has a list of approved credit counselors to choose from for those seeking help from a reputable company.

Step 5: If You’re Mistreated, File a Complaint

In most cases, dealing with a debt collector might be a little unpleasant, but in those situations when a collection agency violates the law with incessant phone calls or threats of violence, you’ll need to file a complaint.

Filing a complaint with the FTC or the CFPB will usually be enough. In extreme cases, you can either report the harassment to your local law enforcement agency or the FBI.

Your Questions About Debt Collection, Answered

Understanding the law is just the first step. We checked with the Consumer Financial Protection Bureau to answer frequently asked questions about dealing with debt collectors.

How Long Can a Collection Agency Attempt to Collect a Debt?

This depends on your state laws. In most cases, the creditor can come after you for as long as necessary for you to pay the debt you owe. However, the CFPB points out that in most states, the statute of limitations for debt is three to six years. If you’re sued over debt that is past the statute of limitations, you could get the case thrown out.

Can I Go to Jail for Being in Debt?

There are very few situations that could result in you getting arrested over an unpaid debt, according to the CFPB: first, if your debt is related to criminal activity — unpaid restitution for a crime, for example — and second, if you ignore a court order. In most other situations, you won’t be arrested for unpaid debt.

Further, it’s illegal for a debt collection agency to threaten you with arrest if jail time is not an actual punishment that could happen. If you were told you’d be arrested for unpaid debt and you later find out that was false, you can file a complaint.

Can I Ignore a Debt Collector?

Ignoring a debt collector won’t make the debt or the collector go away. In fact, it could make your financial problems even worse. It could force the debt collector to take more drastic actions like filing a lawsuit against you.

Can a Debt Collector Take Me to Court?

Yes. However, this usually happens as a last resort after attempts to collect payments through phone calls, emails and mailed notices. To avoid a lawsuit, try to work with your lawyer and the creditor to come up with a payment agreement.

What Should I Do if I Can’t Pay?

If you can’t pay the full amount you owe or the monthly minimum payment, work with your creditor to create a payment plan for the debt. If you still can’t pay, talk to an attorney about options like filing for bankruptcy.

Desiree Stennett (@desi_stennett) is a senior writer at The Penny Hoarder.

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