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According to the Federal Reserve Bank, consumer debt in the United States rose to a whopping $17.29 trillion in Q3 2023. While the number of debt accounts in collections is falling, the amount of debt is rising. Studies show that the average debt account now exceeds $1,600, compared to $1,200 in 2022.
If you’re one of the many Americans dealing with debt collection, understanding your rights and options is the first step to ensuring financial freedom. Keep reading to learn more about debt collection laws and how they might impact you.
To protect yourself from debt collectors, it’s important to understand the various collectios laws protecting your rights. Fortunately, there are many rules and regulations to limit the powers debt collectors have. Below is a look at the most common laws that help protect consumers.
U.S. lawmakers enacted the Fair Debt Collection Practices Act in 1977 to protect consumers from debt collectors’ abusive, deceptive and unethical practices. This law protects consumers in several areas, including:
The Fair Credit Reporting Act helps protect you from other types of abusive actions by debt collectors. Specifically, this law mandates fair and accurate credit reporting. If you find a potential error on your credit report, you can write to the bureau in question and ask them to investigate it. By law, they have to investigate, and if the reporting creditor or collection agency can’t prove those facts, the bureau has to delete or correct the information.
The FCRA also gives you the right to at least one free credit report per year from each credit reporting agency. Plus, you have the right to a copy of your credit report if it’s used to evaluate you for credit and you’re denied because of information in your credit file.
Unfair or Deceptive Acts or Practices refers generally to behaviors in financial and accounting sectors that aren’t legal or ethical. These rules prohibit debt collectors from misstating the facts of the debt in question, falsely claiming they are attorneys or will have you arrested or collecting debt payments in excess of the amount owed.
Debt collectors may act as the middleman between you and the lender you owe money to, or they may purchase your debt from the lender for a fraction of the cost. Either way, debt collection agencies must abide by all federal laws listed above as well as any state regulations.
While these collection laws are put in place to protect consumers from aggressive and unethical behavior by debt collectors, they don’t eliminate the amount of debt you owe. You’re still liable for paying your debts, and debt collectors can use a variety of tactics to try to collect this money.
Technically, a debt can go into collections as soon as you fail to make a payment on time. However, each lender has its own set of standards for the exact timeline it uses to send debt to collections. In some cases, you may be able to prevent this from happening by talking to your lender and making alternative payment arrangements.
The statute of limitations on debt dictates how long a creditor or collection agency can attempt to collect through legal means, including filing a lawsuit. The timeline varies by state and usually starts when you first default. In some cases, you can reset the statute of limitations by making payments on old debt, so this is something to be aware of when dealing with collectors.
Debt collection laws limit how and when debt collectors can contact you. These agencies can’t call certain workplaces, and they can’t continue to call you at your workplace if you tell them to stop. They also can’t send you emails through a known work email address or post information about your debt on social media.
Debt collectors can use several forms of communication, including phone, email, fax, mail and private social media messages. Additionally, debt collection laws only allow debt collectors to call between the hours of 8 a.m. and 9 p.m.
The actions you take when a debt collector contacts you could have long-lasting effects. While ignoring a collection agency may seem like a good option, it doesn’t make the debt go away and can lead to even more stress down the road.
Here are some steps to take if a debt collector contacts you:
If a debt collector violates any of the debt collection laws discussed above, you can and should file a complaint. There are several agencies where you can file these types of complaints, and depending on the situation, you might even file a complaint with more than one.
You can report a debt collector to:
There’s a good chance that your debt went into collections because you didn’t have enough funds to pay the balance due. If this was your situation and you still can’t afford to pay your debt, there are several things you can do, including:
You may be able to pay your balance due to the collection agency through debt settlement. Often, debt collectors are willing to take a lower payment just to be sure they receive something. You can work with the debt collection agency to negotiate a deal, but make sure you get everything in writing before making any payments.
Bankruptcy should be the last option you consider because an action like this can impact your credit score for up to 10 years. Filing a bankruptcy petition puts an automatic stay in effect so debt collectors can’t continue collection activity. Once complete, your bankruptcy may help eliminate all or a portion of the debt you owe.
If you’re dealing with a debt in collections, Lexington Law may be able to help. Find out more about Lexington Law’s credit repair services to find out how you can begin taking positive actions
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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