Consumer Debt: Knowing Your Legal Rights

By Lewis Humphries | October 24, 2011 AAA
Consumer Debt: Knowing Your Legal Rights


Consumer debt is fairly prevalent, even during a prosperous economic climate, so it stands to reason that it should become something of an epidemic during periods of recession. In fact, in 2010 it was estimated that the total amount of consumer debt in the U.S. stood at nearly $2.4 trillion, which equates to approximately $7,800 worth ofdebt for every single man, woman and child. With this in mind, and as economists are currently predicting an unsettling period of double-dip recession for the U.S. economy, it is becoming increasingly important for consumers to know their rights and take responsibility for their individual debts.

TUTORIAL: Credit And Debt Management

Beware of Debt Recovery Agencies and Debt Purchasing
The majority of consumer debt is made up by expenditure on credit cards, which leaves you, as a consumer, owing a particular lender the full amount borrowed with accrued interest on top. However, it is not uncommon for companies to, either, pass your debt onto a registered collection agency, or sell it onto to a debt purchasing company for a reduced cost, with the result of you finding yourself being harassed by organizations that you have never had any direct interactions with. While this can be unsettling, you have legal rights as a consumer, which will protect you from being unfairly targeted by such companies.

Should you begin to receive letters, calls or door to door visits from these agencies, your first step is to write a letter to the company with which your debt lies. As a consumer, you have the right to request proof that a specific agency, or debt purchasing group, has the right to be making financial demands of you, and also to be shown documents which support their role and legitimacy as an organization. If a company cannot provide this, you can refuse to pay these agencies and insist that the debt be returned to its original owner before a payment plan is even considered. (For more on debt collection, read The Dark Side Of Debt Collection.)

Make Sure You are Paying the Right Amount
When it comes to consumer debt, the addition of interest and charges can make it difficult for you to ascertain the exact amount payable to any given lending organization. It is important that you take control for the amount that you owe, and it is your duty to find out the exact sum and decipher a realistic repayment plan. One option open to you, as a consumer, is to purchase a copy of your credit report, which highlights which debts are outstanding and the amount payable for each. There is also further help at hand for consumers in this situation, as the Fair Debt Collection Practices Act (FDCPA) exists to regulate the behavior of collection agencies and assist debtors in obtaining valid information concerning their debt. (Read Check Your Credit Report for further details on what appears on your report.)

By seeking the assistance of the FDCPA, as a consumer, you can not only insist that you receive updated information with regards to the amounts that you owe, but also dispute any debts that you consider to have either been paid off or overly inflated by interest and erroneous charges. You should be able to request a breakdown of your debt from the creditor without too much issue, and this should detail the initial amount borrowed and where the interest and any affiliated charges have been accrued. In terms of protecting yourself from unscrupulous creditors, this is often the first step towards eradicating unwanted debt.

Seek Every Open Avenue of Assistance
While being encumbered with debt can seem like a lonely existence, there are numerous reputable organizations out there who are waiting to help you. Not only this, but they offer a diverse range of options to help you reduce debt, and eventually satisfy the demands of your creditors. You need to be fully aware of all of these options, and what they can offer you, whether you consider employing a debt management company, who take a monthly installment and negotiate payments with creditors on your behalf, or instead look to negotiate a revised amount directly with lending bodies and settle your debts with a single payment.

Each option has different requirements and set of immediate consequences, and you must have a clear knowledge of these as well as your financial incomings, outgoings and the exact amount of disposable income that sits in your bank account at the end of every month. This enables you to source and follow the most viable option towards complete solvency, without incurring further debt through unsecured loans. Although debt management firms and debt negotiation agents are established to assist consumers, you have a legal responsibility to make considered decisions and adhere to any contract that you enter into with a company. (For insight into dealing with debt, read 7 Tips For The Do-It-Yourself Debt Manager.)

The Bottom Line
Debt is an unfortunate feature of the modern world, but it is also something which is experienced by the majority of U.S. citizens, to one degree or another. Having an awareness of your rights and legal requirements as a consumer helps to create a framework with which to operate within, while using online resources can also give you access to any number of reputable debt management and settlement agencies who may be able to help you. In short, by being proactive and taking responsibility for your debts and their settlement, you will be able to rid yourself of financial burden and start to plan for a brighter future.

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