Debt collectors have two subtle weapons at their disposal: fear and ignorance. Many people dread the midnight phone calls or the embarrassing workplace confrontations, not realizing that these old standby threats are just that - threats. As you'll learn, these practices and other tricks of the debt collection trade are actually illegal. Being pursued by debt collectors can be scary, but it doesn't have to be if you understand your rights and the limitations put on collection agencies. Read on to learn how to handle the initial contact, how to properly communicate with a collection agency, what your rights are and what constitutes abusive behavior on the part of a debt collector. In the debt collection game, knowledge truly is power. (To dig yourself out of a hole, see our Debt Management Feature.)
Handling Debt Collection Phone Calls
Your first line of defense is knowing what to say and what to avoid saying in any communication with a debt collector. Don't let a collector that contacts you by phone catch you off guard: put the ball back in the collector's court by asking the caller these key questions:
- The caller's name.
- The name of the collection agency that the collector is calling on behalf of.
- An address at which you can contact the collection agency.
- The name of the creditor.
- The amount the collector claims you owe.
During this initial contact, make sure to avoid saying anything that could be considered an admission that the debt is yours. Some debts that collectors claim you owe might not be legitimate because of identity theft, billing errors or an expired statute of limitations. Not only should you avoid forking over money that you aren't legally obligated to pay, but paying the debt could have a severely negative effect on your credit score. (If you're sure the debt isn't yours, read How To Dispute Errors On Your Credit Report and How To Dispute A Credit Card Charge.)
End the conversation by asking the caller to send you a letter stating what they claim you owe. The caller should already have your address; if not, don't give it out and suspect foul play. Getting all of the information in writing will allow you to verify whether you owe the debt and, if you do, that the amount is correct. To further protect yourself, from the first time you are contacted by a debt collector, you should start a file to keep a detailed log of any phone calls and copies of all correspondence. (To learn more, read Identity Theft: How To Avoid It.)
Handling Debt Collection Letters
If the collector's initial contact is by letter, the details of the debt should be stated in the letter. If the letter is vague, write (don't call) to get the details. Include a copy of the letter you received and don't provide any information about yourself in the letter that the collector does not already have.
When following up with the collection agency's initial contact, send your letter with a service that requires signature confirmation of delivery. Communicating by mail allows you to keep a detailed and accurate record of your interactions with the agency, and with signature confirmation, they can't later deny having received your letter. In your letter, notify the debt collector that all or part of the debt is being disputed and make sure to mail the letter within 30 days of the agency's initial contact. Stating that the debt is disputed will give you time to verify the debt. If you need help with this process, visit the Privacy Rights Clearinghouse website to learn how to write an effective letter to a debt collector.
Make it clear to the collector that you know your rights; the collection agency might be more likely to treat you fairly (in the case of a legitimate debt) or leave you alone (in the case of a bogus one) if they know you are not an easy target.
What Happens Next?
At this point, you have told the debt collector by phone or by mail that you want a written explanation of the debt you are accused of owing. Upon receipt of your request, the collector must provide you with written verification of the debt (or a copy of a judgment against you) and the name and address of the original creditor, if different from that of the current debt collector.
After you have disputed the debt in writing, debt collection activity must cease until you have received a copy of the debt verification or judgment and the name and address of the original creditor.
The next section will discuss your rights and what constitutes abusive behavior from a collection agency.
Know Your Rights
As this process unfolds, make sure you know that consumers have considerable rights under the Fair Debt Collection Practices Act (FDCPA). This act was created by The Federal Trade Commission (FTC) to eliminate abusive, deceptive and unfair debt collection practices. The act specifically lays out other guidelines that debt collectors are legally required to abide by.
The following list highlights your rights. This is just a partial list - for a complete list, consult the text of the FDCPA (PDF). Also, individual state laws may offer you even greater protection from debt collectors than the FDCPA.
- The debt collector must state, upon first contact with you, if that contact is verbal, "that the debt collector is attempting to collect a debt and that any information obtained will be for that purpose."
- If you hire an attorney, the debt collection agency must communicate only with your attorney, not directly with you, unless the attorney does not reply to the debt collector or gives the debt collector permission to contact you.
- The debt collector is allowed to contact other people, such as your friends, relatives, or neighbors in an attempt to acquire "location information", such as your home address and phone number and your employer's address and phone number. Debt collectors must identify themselves when contacting a third party, but cannot tell anyone they contact that you owe any debt.
The FDCPA also enables consumers to identify abusive debt collection practices by providing a list of behaviors that debt collectors may not engage in. Here are some of the most important guidelines:
- Debt collectors may not contact you before or after in your time zone.
- Debt collectors may not contact you at work if you inform them that your employer prohibits you from receiving such communication. (Though your employee handbook probably does not specifically address debt collection activities in the workplace, your company probably does not want you handling personal business during work hours.)
- Debt collectors must comply with your written request to stop contacting you. After that, they can only further communicate with you to tell you that they are terminating their collection efforts or that they intend to seek a specified legal remedy against you.
- Debt collectors may not harass or abuse you. Specifically, they may not threaten violence, use obscene language, publish a list of consumers "who allegedly refuse to pay debts", cause your phone to ring excessively, or engage you in phone conversation repeatedly "with intent to annoy, abuse, or harass any person at the called number". They also may not call without identifying themselves or using a fake name.
- Debt collectors may not attempt to shame you into paying by implying that you have committed a crime.
- Debt collectors may not communicate with you by postcard and they may not include anything on the envelope of a letter to indicate that they are a debt collection agency. The idea here is that your financial information should be kept private - a postal employee, family member or roommate who happens to see your mail shouldn't be privy to this information.
- Debt collectors may not tell you that they are employed by a consumer reporting agency (because they are not).
Under the FDCPA, a debt collection agency's only real defense for bad behavior is being able to prove that they made an error. If you need to file a subsequent complaint or a lawsuit, this documentation will be indispensable. (For related reading, see How To Pick The Right Lawyer.)
If you don't want to deal with the hassle of filing a lawsuit or you're not sure if the debt collector has broken the law but suspect foul play, there is still something you can do. Take action against shady debt collection practices by filing a complaint with the FTC and with your state attorney general. In your complaint, include a detailed description of the abusive behavior and, ideally, cite the law or laws that the debt collection agency has violated. One individual complaint may not seem to make much difference, but if enough consumers take action it can lead to new legislation with greater consumer protection.
Effectively protecting your best interests when dealing with debt collectors really boils down to two things: familiarizing yourself with the Fair Debt Collection Practices Act and getting everything in writing. While knowing how to handle the situation won't make it any more fun, it will at least make it less scary and give you the confidence to stand up for yourself if you learn that the debt being collected isn't legitimate or if you are treated abusively by collectors.
For help getting out of debt, read Digging Out Of Personal Debt and Debt Consolidation Made Easy.