What is the FDCPA/FCRA, and how does it relate to dealing with collection agencies?
In a nutshell, the FDCPA and FCRA were laws put into effect in 1977 (about when credit cards were available to the masses) that creditors collecting on debts could not burden a debtor for life. Thus the 7.5 year reporting time and the statute of limitations were implemented. Basically stated, creditors have a set limited amount of time to report and collect on legally owed debts. This provides protection to consumers or debt because there is a defined period of time when a debt can no longer be enforced by a creditor. Read about should you default on credit card debt?
Remember, that this is your credit report you’re dealing with, and anything negative listed can/will affect your job, housing, banking, loans, education, and general overall health. Having a correct report is vital! Again, this is a viable tool afforded to you in dealing with debts, whether you think it’s moral or not. Know your rights can give you enormous leverage when dealing with debt collections agencies.
Collection Agency Laws: What is the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA)?
It was also decided that to protect debtors/consumers, a set of rules and regulations were needed to protect them and to control what could and couldn’t be reported on their credit reports. There are also many collection agency laws that must be followed in the collection of debt. This came to be called the Fair Credit Reporting Act or FCRA, and was implemented in October 1970. It was also decided that collection agencies had to follow a set of rules and regulations when attempting to collect. This was called the Fair Debt Collection Practices Act or FDCPA.
These collection agency laws mostly apply to third party debt collectors, and not original creditors. However some states have similar consumer protection laws that mirror the FDCPA. The FDCPA covers debts by consumers, and not businesses. Every time a debtor uses credit from a lender, both debtor and the lender are subject to the rules and laws of the FDCPA and FCRA. Fair debt collection must take place or there could be significant penalties.
Tips on Dealing with Collection Agencies
Dealing with collection agencies can be very hard for most consumers. Remember, Collection agencies have one goal in mind: to get as much money from you as they can. It doesn’t matter to them how they do this, and in cases of unscrupulous Collections Agencies, it doesn’t matter what they say to achieve their goal.
Collection agencies do not care about your hardships, or that your spouse was in an accident and was the sole earner. They do not care that you got sick and missed two pay checks and thus fell behind on bills. They want the money. Is some cases, as in assigned debt, the faster they collect from you the higher their commission. Typically, they’ll pay pennies on the dollar but will still want all of the debt owed.
Common Tips when Dealing with Collections Agencies
This is merely a guideline, and everyone has a unique situation. If you think your situation is particulary complex or confusing, make sure to reach out to a lawyer or credit counsleor who may provide lots of assistance in dealing with collection agencies. However, there are a few basic points that are common for everyone:
Send Certified Mail to Collections Agencies
All written communication should be sent Certified Mail, Return Receipt Requested with the collections agency. Sending a written dispute letter (and keeping a copy for yourself) provides you with the date the letter was accepted by the debt collection agency. This not only creates a paper trail, but also starts the clock to which a Credit Reporting Agency or a Collections Agency must abide by.
If you’re having trouble disputing a mark with Credit Reporting Agencies (or CRAs, like TransUnion, Equifax, Experian), it’s often recommended to send your dispute via Certified Mail, Return Receipt Requested. This is in contrast to online dispute letters via the Reporting Agency’s website.
Fair Debt Collection Laws
Know your rights under Federal debt law This is where looking up the Fair Debt Collection Practices Act (FDCPA) helps you. It allows you to retaliate if the Collections Agency is using abusive, unfair, or deceptive methods to collect from you. It also provides the guidelines for when and how they can contact you. Debt collections agencies must adhere to the following guidelines when contacting you:
- They are not allowed to contact you before 8 AM, or after 9PM unless you agree to it.
- They are not allowed to contact you at work if you have informed them, via writing or orally, that you are not allowed to get calls there.
- You are allowed to request the Collections Agency to stop contacting you via phone, and they will be required to continue only via written communication.
- They are not allowed to share the details of the account with anyone except the debtor.
If you wish to cease communications via phone, get their address, send them a letter via Certified Mail (Return Receipt Requested), and specifically tell them to only communicate via writing. Keep a copy of the letter for future reference, as well as the number the USPS uses to track the letter.
Possibly Record Calls with Debt Collectors
Know your state’s telephone recording laws. When you can, record the conversation. Some states require that only one person needs to know that the telephone conversation is being recorded; in that case, it would be you. This is to keep track of the Collections Agencies to ensure they are not infringing on your rights. If they do, you can pursue them for damages. There are recording apps for most smartphones that you may wish to look into.
Recording does two things: It informs the collections agency that they are being recorded (which may encourage them to cooperate), and the record becomes evidence that can be used in a court of law.
If you cannot record, due to state laws (or you just don’t have the capability to do so), keep a log book of your interactions with the collections agency. Write down the time, the date, and what was said. Write down what they requested, what you responded, and so on. A log book can be used as evidence. Let them talk. Let them go through their spiel. Write down everything if you aren’t recording: for future reference, and to check against your records (it could simply be that they have the wrong person).
Tell Debt Collectors to Stop Calling You
Request the collections agency mailing address. Repeat it back to them to confirm. If you don’t want them to contact you again via phone, inform them. Be very clear about it. Repeat it in the certified letter you send to them. You may also inform them to not contact you at your work too. Repeat that in the certified letter as well. Once they have been informed they cannot contact you at your place of business or your personal number, they can only contact you to inform you that they won’t contact you again (or if they are informing you of legal action). Any other contact contact via phone is a violation of the FDCPA.
Have Debt Collectors Mail Information
Request they send the account information via mail. This is important! You are requesting they send all the information about the delinquent account to you in writing. This is will allow you to have the documentation in your hands, where you can look at each piece versus trying to remember it in your head. It also prevents you from saying something that can hurt you legally: Admitting you owe the debt (even if you’re not sure), agreeing to make a payment, or inferring that you can make a payment. All these things may hurt you.
Fair Debt Collection Laws: Request a Debt Verification Notice
Request a Debt Verification Notice. You should clearly state something along the lines of “This is not an admission of owing the debt, but I need the information regarding said debt to verify whether or not it is indeed mine. Please send me a validation notice. Please send the information to […].” A validation notice is just that: it notifies you of the amount of the debt owed, the name of the creditor to whom the debt is owed, and directions on how to proceed if you think you don’t owe the debt. The collections agency must send the validation notice to you within five days of the initial phone call. Failure to send it is a violation of the FDCPA, and if you’ve recorded the call, you can use that in court.
Debt Collector Harassment
If at any point the Collections Agency becomes aggressive, rude, or keeps repeating the question of when you can make a payment, just hang up. Simple as that. If by this point you have not requested they cease calling you, make sure you inform them the next time they call. (And they will call again!) Even if you have to talk over them, keep repeating yourself. Again, if you are recording the call, this can be used as evidence.
Debt Validation Letters
Once you receive the validation notice, even if you know you owe the debt, send a debt validation letter within 30 days of receiving the Collection Ageny’s validation notice. If you believe in good faith that the debt is in error, send them a dispute letter stating the debt is not yours. Even if you know you owe the debt, the collections agencies must prove that you owe the debt. Failure to provide these important details means the agency is not legally entitled to collect said debt. They should be able to answer the following questions:
- Is the amount shown the actual amount owed?
- Has there been any interest or other charges added, and are the interest and the other charges added legally?
- Where is the original contract stating the details of the terms of the debt?
Validating a Debt with a Collections Agency
It is your lawful right to request that the Collections Agency validate a debt they are trying to collect on. Once you have requested a debt validation, by law, the Collections Agency must stop collection attempts. If they continue to do so, the debtor can sue. A debtor can dispute all (or a portion) of said debt, and it all begins with a collection notice.
Once a collection notice has been received, the debtor has 30 days to respond. Failure to respond verifies said debt automatically. If a notice to verify said debt is sent within 30 days of the initial collection attempt, than the Agency must stop collection attempts until the required information verifying the debt is provided.
Debt Collector Harassment
There is no time requirement within which a Collections Agency needs to validate the debt. They could take a week, a month, a year, or longer; but during that time period, collections must cease.
The first step a CA has to take when attempting to collect on a debt is to verify that you indeed do owe said debt(s). Unfortunately, there are only two things that a CA needs to provide:
- The name of the creditor to whom the debt is owed to.
- The amount of the debt owed.
Collection Agency Harassment
One should always request a Collections Agency to verify the debt, as well as request the address to the Original Creditor to whom the debt is owed to. Once again, all communications should be in writing, sent Certified Mail, Return Receipt Requested via the USPS.
Please note that there are certain instances when verifying a debt could cause more damage than intended. For instance, it makes no sense to request a verification on a debt that is at or near the Statute of Limitation or that is at or near the reporting clock. Doing so only increases the chance that Collections takes legal action while they still can.
What Happens if a Collections Agency Sues you?
DON’T PANIC! You MUST answer the lawsuit! Failure to do so (failure to show) results in an automatic default judgment against you! This judgement wrecks your score and it can literally take years for it to go away. See “Judgment” in the terms listed below for additional information. I would highly suggest you retain the services of a competent lawyer at this point.
When do debt collectors sue a debtor?
Typically one gets sued over a very high amount debt, and as a last resort when the SOL is nearing on said debt. I liken it to the “Hail Mary” play in football. The CAs know that time is running out and there’s just enough time left to get one last play in. What is the “Hail Mary”? It’s a trick play. Just like it is in football, so it is in collecting. I typically find that the CAs DON’T have the required documentation to prove the debt belongs to the debtor. So much so that before entering the court room, the CAs attempt to get the debtor to pay something to “avoid the unpleasantries of a court battle.” However when asked for proof of the original contract, or to provide the debtors signature, etc. they’re all thumbs! It’s their last scare tactic.