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What You Need to Know about Debt Collectors

WalletPop.com recently published an interview with a journalist who decided to spend some time working at a debt collection agency to research whether or not the company complied with federal guidelines for debt collectors (as outlined in the Fair Debt Collection Practices Act).

His findings (which are detailed in the book Fight Back against Unfair Debt Collection Practices), are summarized below.

What to Expect from Debt Collectors

While federal law specifically states that debt collectors must follow various guidelines that basically add up to treating debtors with respect, various reports have suggested that many collectors regularly break these guidelines—and most consumers don’t realize they have rights in the matter.

Here are some classic maneuvers to watch out for and speak up about if you encounter:

• Trainees don’t count. It seems that some collection agencies excuse illegal behavior from employees by identifying them as “trainees,” meaning that they haven’t been fully instructed on how to behave according to the laws. To counteract this potential argument, make sure you document any threatening or rude calls from debt collectors: get their name, employee number, the date and the time of the call.
• Tapes and lawyers come in handy. Apparently, debt collectors will play by the rules if you notify them that you are recording the conversation or that your lawyer is handling your debt collection calls. Be warned, though, that professional collectors have worked with a lot of debtors and you’ll actually need to have a lawyer retained if you claim you do.
• Don’t give permission. In order to contact you outside the hours of 8:00 am and 9:00 pm, debt collectors need your express permission; however, it seems that some debt collectors will essentially lie about getting such permission by fudging their notes about a call. This reinforces the importance of taking notes about such phone calls yourself to use in cases of harassment.
• Collectors probably know your credit history. One reportedly common tactic is for a collector to refer to other debts you may be current on when trying to collect a debt on which you’ve fallen behind. This means that you should be checking your credit report regularly to make sure you know at least as much as they do.
• Get settlements in writing. If you and a collector agree to settle a debt for a partial, lump-sum payment, be sure to get the agreement in writing before making any payments. The agreement should have the original amount of the debt, the agreed settlement amount and the terms of the repayment. If you’re communicating with a collector over the phone, insist on an emailed PDF or a faxed copy of the agreement before making any payment.

Protect Your Rights from Debt Collectors

If you think your rights have been violated, you may want to contact a bankruptcy lawyer in your area to see what your options are for moving forward.

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Dealing with Debt Collectors: What Not to Do

As the Great Recession continues to take its toll on the economy and employment landscape, millions of Americans are finding themselves struggling to manage and eliminate their debt. But that’s rarely an easy task, especially during high-stress interactions like contact from a debt collector.

It’s important to remember that, even though you owe someone money, you still have rights: you can and should expect to be treated respectfully by collectors and, no matter how much pressure one puts on you, there are a few things that analysts suggest you should avoid.

Here’s a look at some of those no-nos, adapted from this article:

• Sending a post-dated check: While it may be tempting to get a debt collector off your back by sending a post-dated check to cover what you owe, sources indicate that it’s generally not a good idea. Why? Some collectors, it seems, have been known to deposit such checks early, and most banks permit them to do so. This could leave you with bounced check fees and other unpleasant matters to deal with if you don’t have sufficient funds in your account.
• Divulging your bank account number: No matter how much money you owe, debt collectors are not legally entitled to your bank account number or other sensitive financial data. Even if you decide to make regular payments from a certain account, opt for a money order or a cashier’s check from a bank other than your own. If you’ve already given out an account number, keep a careful eye on the activity in that account and be prepared to challenge any withdrawals you haven’t approved.
• Indicating that you’ll be applying for a loan: Sometimes, before applying for a loan, consumers attempt to clean up their credit reports by paying old debts and trying to get rid of other negative information. But letting a collector know what your goals are can work against you—instead, if you choose to contact a creditor, ask him to verify a debt in writing. Then, ask for written proof that he will remove the negative information from your credit report after you’ve paid; once you receive that proof, you can repay the debt.

The difficult economy has meant that more Americans than ever are struggling with day-to-day expenses, and the FTC noted that complaints about debt collectors rose by 12 percent in 2009 and outnumbered all other complaint types.

For a more detailed look at what you can expect, check out this page on your consumer rights with debt collectors. Further, know that debt collectors cannot legally contact you:

• To collect debts whose statute of limitations has passed;
• To collect debts that have been discharged in bankruptcy; or
• To collect debts while bankruptcy’s automatic stay is in place.

Posted in Credit and Bankruptcy, Creditor Harassment, Creditors, automatic stay, collections | Comments Off

The Worrisome Truth about Debt Collectors

There’s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

• Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
• Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor’s possessions in lieu of payment.
• Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don’t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

• Phone contact outside the 8 am – 9 pm window
• Phone calls intended to harass, annoy or abuse (including repeated phone calls)
• Threat of legal action or arrest when none is legally permissible
• Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
• Communication with third parties about a consumer’s debt
• Contact at work after being asked to avoid such contact

Debts You Don’t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren’t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you’ve been wronged by the collection industry. It could save you from paying money you don’t owe.

Additional Resources

Fair Debt Collection Practices Act

Posted in Creditor Harassment, Financial Literacy, debt collection | Comments Off

The Worrisome Truth about Debt Collectors

There’s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

• Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
• Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor’s possessions in lieu of payment.
• Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don’t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

• Phone contact outside the 8 am – 9 pm window
• Phone calls intended to harass, annoy or abuse (including repeated phone calls)
• Threat of legal action or arrest when none is legally permissible
• Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
• Communication with third parties about a consumer’s debt
• Contact at work after being asked to avoid such contact

Debts You Don’t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren’t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you’ve been wronged by the collection industry. It could save you from paying money you don’t owe.

Additional Resources

Fair Debt Collection Practices Act

Posted in Creditor Harassment, Financial Literacy, collection calls, debt collection | Comments Off

Debt Collectors Behaving Badly (And How to Make Them Stop)

Debt collectors in certain areas of the country have begun contacting debtors in more and more harassing ways, according to a recent article from WNEP in Pennsylvania.

This situation is troublesome not only because it can cause fear and embarrassment for debt collectors’ victims, but also because such techniques are illegal.

The Slimy Tactics Reported by Victims

While repeated phone calls from a bill collector may be irritating, some of the actions that are being attributed to collectors are downright appalling:

• Threats of jail time: Some debtors have reportedly been threatened with arrest—even with arrest at their place of employment.
• Insults: Sources indicate that some collectors have taken to belittling debtors about their level of education and their work ethic.
• Cruel suggestions: Apparently, some debt collectors have gone so far as to suggest debtors commit suicide as a way to remedy their inability to repay their debts.
• Neighbor contacts: It seems some collectors have even ducked as low as contacting a person’s neighbors about debts owed.

Clearly, something is wrong here. Debt collectors are not legally allowed to get away with such actions, but unfortunately many consumers aren’t aware that they have rights protected by federal law.

Your Rights and Options

So what exactly are creditors forbidden from doing? Here’s a summary of what actions are prohibited by the Fair Debt Collection Practices Act:

• Harassing a debtor, her family or her friends
• Failing to follow up a phone call with written details about a debt within five days
• Contacting anyone besides the debtor or his lawyer about a debt
• Physically or verbally threatening a debtor
• Suggesting or implying that a debtor can be arrested when she legally cannot
• Lying about the amount of the debt owed
• Contacting the debtor directly when he has known legal representation
• Ignoring a debtor’s written denial of a debt

The collectors mentioned in the story above were breaking the law—but unless the debtors are aware of the laws protecting them, they’re not likely to take any action.

Halt Creditors with the Automatic Stay

If you’re facing aggressive behavior from a creditor, it may be time to consider working with a legal professional. One option for stopping creditor contacts is filing for bankruptcy, which will trigger an automatic stay that blocks all contact from creditors.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Bankruptcy and the Economy, Creditor Harassment, Creditors, collectors | Comments Off