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Debt collection laws exist to protect consumers from unfair debt collection practices. The inception of collection agencies brought with it a prevalence of abusive and deceptive debt collection practices among collectors.
Since then, a federal law called the Fair Debt Collection Practices Act (FDCPA) was enacted to combat abusive and unethical behavior by debt collectors. The FDCPA places certain limitations on debt collectors and the methods they use to contact debtors.
It’s important to know your rights and what a debt collector can and cannot do by law. If you’re being contacted by a debt collector, you can protect yourself by understanding what’s within their limitations and what’s not.
People often misunderstand exactly who the FDCPA applies to. The law targets third-party debt collectors: Collection agencies, debt buyers and lawyers who practice debt collection as part of their business are all considered third-party debt collectors.
The FDCPA covers debts such as mortgages, credit card debt, medical debt, student loans and auto loans. The law outlines the specific limitations of how a debt collector can contact you, and if violated, a lawsuit is warranted within a year against the collector or collection agency.
While the FDCPA protects consumers from unfair debt collection practices, it’s important to note that business debts aren’t covered. The FDCPA only applies when the debt is incurred for “personal, family, or household purposes.”
Debt collectors are within their rights to contact friends and family in order to find your address, phone number or place of work. However, they can only contact each individual once, and they can’t discuss the details of your debt with anyone but you, your spouse and your attorney.
When a debt collector contacts you, they are required to identify themselves as a debt collector. After identifying themselves, they should state the debt they’re calling about and request payment for it. They should also inform you that any information you provide during the communication will be used in the effort of collecting the debt.
The FDCPA prohibits collectors from engaging in any form of harassment, including communication that is abusive, threatening or deceptive. Examples of harassment include:
When a debt collector contacts you about a debt, they are required by law to provide specific details about the claimed debt at hand. This includes:
If you speak to a collector and they fail to provide this information in the first instance of contact, they are required to send it to you in writing within five days.
A debt collector can only ask for the amount you owe including outstanding fees, charges and unpaid interest—any request for additional payments outside of that scope is prohibited by law.
When you speak with a debt collector, you’re allowed to ask for any additional information pertaining to the debt at hand. It’s also within your rights to dispute the debt if you believe it’s been made in error or if you believe the claimed amount owed is incorrect.
If you’ve been contacted by a debt collector claiming you owe a debt and you believe it’s in error, you can contact the collector in writing explaining that you want to dispute the case. If you do this within 30 days of receiving your debt verification notice, the collector cannot contact you while your claim is being investigated. If you fail to do so within 30 days, you can still send a letter to investigate the debt—but the collector will still be legally allowed to continue contacting you.
While you can request investigation of the debt over the phone, doing so permits the collector to continue debt collection activities and they aren’t required to stop contacting you while the debt is verified. That’s why it’s best to always make your disputes in writing. It’s wise to send your letter by certified mail and pay for a return receipt—this allows you to prove the collector received it.
A debt verification notice is the written notice sent by a debt collector in response to your letter of dispute. It includes details about what you owe and to whom you owe it. As mentioned above, debt collectors are obligated to send this if you notify them of your wish to investigate the debt, or otherwise notify you that they will cease their collection efforts (as long as you sent the letter within 30 days of first contact with the collector.) Here’s what it should include:
The debt verification notice is meant to provide you with enough information about the debt that you can compare it to your own records and determine whether or not you actually owe it. The notice will include different information depending on your grounds for dispute:
Remember that if you make a written request for a debt verification notice, the collector is legally required to cease all debt collection activities and communication with you until they provide the requested information. If they attempt to communicate with you within this 30-day period, they can be held legally responsible for breaching the FDCPA. It’s wise to keep a copy of this letter for your records, and send the letter by certified mail to have proof that the collector received it.
It is within your rights to request a collector to cease communication with you. It must be done in writing and sent by mail. Again, it’s best to send the letter by certified mail along with a return receipt in order to have the request on record.
From that point on, the collector may only contact you to inform you that they’re terminating their efforts or to explain their next steps, such as taking the case to court.
If a debt collector is harassing you or treating you unfairly, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). You can also report issues with your state’s attorney general’s office and the Federal Trade Commission (FTC).
Most debts have a shelf life—after three to seven years, they usually expire. This is known as a statute of limitations, and once it expires, the debt becomes time-barred and the collector can no longer legally force you to pay a debt in court.
While it’s true that once that statute of limitations is up, debt collectors can’t take legal action against you—like filing a lawsuit against you for a debt you owe—they can still make attempts to collect the debt by calling you and sending letters.
The exact time frame varies by state, so this depends on where you incurred the debt. It also depends on the type of debt you’re dealing with. If you’re unsure of the specifics for your situation, it’s smart to contact an attorney who handles debt law. You can search for debt collection defense law firms in your area to find a local resource to help you navigate your situation and provide the facts about where you stand.
No. If your debt is time-barred because it’s reached its statute of limitations, the only thing that can restart the clock on it is if you make a payment on it (or a partial payment) or even promise to pay the debt, thereby admitting you owe it. Other actions that could restart the statute of limitations include entering into a payment plan or accepting a settlement offer from the collector.
While investigating your debt won’t restart the statute of limitations, admitting the debt is yours during your dispute will. It’s important to be cautious in your conversations with debt collectors—some will try and get you to admit to the debt without you realizing it, and then the clock restarts. Again, it’s wise to partner with a debt collection law firm to navigate these types of situations, which can get dicey if you aren’t aware of your state’s laws, your rights and the specifics of your situation.
Like any unpaid debt or missed payment, having a collection on your account will have a negative effect on your credit score. Lenders want to see that you’re a responsible borrower, and if your debts have gone to collections, they diminish your creditworthiness.
When you have a debt in collections, it means the original creditor assumed you weren’t intending to pay it (this could be after 60, 120 or even 180 days depending on the lender) and passed it off to a collection agency. Credit bureaus usually categorize these debts based on how late they are, which determines how much your credit score will drop.
Generally, a debt in collections remains on your credit report for up to seven years. After seven years, the debt should fall off. The most recently added debt accounts on a credit report will have a more severe impact on your credit. But by and large, there’s no one-size-fits-all answer for how an unpaid debt will affect your credit score, because it’s dependent on your unique credit history and the type of debt incurred. Someone who’s only had one debt transferred to collections may have an easier time than someone with repeated collection accounts on record.
The Fair Credit Reporting Act (FCRA) ensures the accuracy of information on consumer credit reports. If you believe a collection is inaccurate, you have the legal right to have it removed from your credit report. To dispute the collection, send a letter to the credit bureau or fill out a form on their website.
After you submit a dispute, the credit bureau has 30 days to look into it. If they find that the collection isn’t accurate, it should be removed from your credit report.
Ultimately, debt collections can be crushing to your credit score if you aren’t careful. Your credit report affects countless areas of your life, from your ability to get a loan or a credit card, to the annual percentage rate (APR) you pay for a line of credit to even employment. Luckily, you aren’t defenseless when facing debt collections: the entire purpose of debt collection laws is to protect you, the consumer. Understanding how they work and knowing your rights can empower you to work out the debt in the best way possible and protect yourself in the process.
Navigating unpaid debts isn’t something to brush off, and understanding your rights as a consumer is a smart place to start when it comes to handling debt. Read up on how negative items could affect your credit so that you’re prepared for anything life throws at you, and work with a credit repair law firm, like Lexington Law, to get additional help with your credit.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
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