It's not unusual to have a New Year's resolution to get out of debt. Whether you carry your debt
on your credit card(s) or have outstanding student loan debt, if you miss even one payment,
increasing interest rates, plus late fees, can quickly balloon out of control.
Eventually, you might even find yourself answering to collection agencies rather than the
original issuers of your debt. According to the Consumer Financial Protection Bureau, 30 million
Americans are currently subject to debt collection.
Debt collectors are known for rather ruthless practices, so it pays to know your rights when it
comes to debt collection. For example, debt collectors are, indeed, allowed to call you at work,
unless you inform them, either orally or in writing, that your employer does not permit you to
accept such calls. This stipulation is part of the Fair Debt Collection Practices Act.
The legislation was passed to protect consumers from "abusive, unfair and deceptive debt
collection practices," which the act says "contribute to the number of personal bankruptcies, to
marital instability, to the loss of jobs, and to invasions of individual privacy. "
What protections does the Fair Debt Collection Practices Act offer?
According to the Federal Trade Commission, debt collectors are only allowed to contact you
during convenient hours, which, unless otherwise defined, are assumed to between 8 a.m. and 9
p.m. in your time zone.
Debt collectors can contact family members or employers in an effort to try to locate a person,
but the collectors are only supposed to call each person once. They're also not allowed to tell
third parties that the debtor owes money.
What abusive practices are prohibited?
Debt collectors will often say almost anything in their efforts to collect a payment because of the
payments they receive to get you to pay up. In a Kiplinger article called "Confessions of a Debt
Collector," reporter Fred Williams, who worked at a collection agency for three months, wrote
that his top-performing co-workers got up to $10,000 bonuses.
To get the money, his coworker sometimes pretended to be paralegals or "fraud investigators,"
he wrote. Other collection agency employees gave terrible financial advice: "We suggest that
they take money out of their IRA, drain their home equity with a second mortgage, load up a different credit card or even skip a mortgage payment," Williams wrote.
Still, no matter how much money you may owe, debt collectors are not allowed to threaten you
with violence, use obscene language, or repeatedly call to annoy you.
Collectors are also not supposed to lie or tell you they are attorneys or that they have sent legal
forms if they haven't.
In addition, collection agencies aren't allowed to threaten to tell your employer about your debt.
They also can't tell you that you will be arrested if you won't pay your debt or that they'll seize
your property or garnish your wages — unless allowed to by law and they intend to do so.
If you don't pay a debt that's owed, you can be sued by a creditor or debt collector.
"You shouldn't ignore or avoid a legal summons because if you lose in court, a creditor
or collection against can get a judgment against you," says attorney Brian Albert of legal
information website THELAW.TV. "A judgment allows the creditor or collection to garnish
your wages or seize your assets, like money in a bank account."
What if you actually don't owe the money?
If you are contacted by a debt collector, you have 30 days to send them a letter saying that you
don't owe the amount stated. By law, the collection agency must then stop getting in touch with
you. But, according to the Federal Trade Commission, a collector can begin contacting you again
if it sends you written verification of the debt, like a copy of a bill for the amount you owe.
Who monitors collection agencies?
While the FTC doesn't help resolve individual complaints, it does keep a record of all complaints
received and uses this database to launch investigations of bad business practices. Visit https://
www.ftccomplaintassistant.gov/ to file a complaint.
Starting on January 2, 2013, the Consumer Financial Protection Bureau will be monitoring
large collection agencies and sharing information with the FTC. The CFPB was established by
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in order to regulate
consumer financial products and services.