The situation is common. You have a debt with a company, and after you think the issue is behind you, you get a call from a collection agency or a debt collector.
A primary creditor attempts to collect on a bill until it no longer makes financial sense for them to do so. They then sell the debt to a third-party collection agency. There is actually an entire debt market where anyone who has cash can purchase past-due debts for an amazingly low price: typically 5% of the debt owed (and 2% for older accounts). This also includes charged-off debts, which is debt that is delinquent by at least 90 to 180 days that the lender has decided to treat as uncollectible for financial reporting and tax purposes (note: this means the debt comes off of their books, not yours).
The good thing about having your debt sold to a third party collection agency is that there are specific laws under the Fair Debt Collection Practices Act to protect you from being unreasonably harassed or preyed upon by them. (These same laws do not apply to your primary creditor) The bad news is that collection agencies are notorious for brazenly getting around these laws. Even when they are within their rights — and granted, most of the people they go after do owe money — their tactics and persistence can be vicious.
A third-party collection agency has several obligations to you as a consumer/debtor in order to make their process legal. Here’s what you need to know at each point in the process:
- Prior to the First Phone Conversation: Know that the collection agent is allowed to get a copy of your credit report if the amount of debt exceeds $500. This may not sound like a big deal, except that there is a whole lot of personal and financial information available on this report. Your credit report can ultimately be used in your conversation as fodder for why you should pay back your debt (i.e., if they see that you are making on-time mortgage payments, they may ask “Why can’t you pay us if you can pay your mortgage?”).
- First Phone Conversation: An agent cannot contact you outside of between 8:00 a.m. and 9:00 p.m. In the first phone call, the collection agent is required by law to give you a disclosure along the lines of: “the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.”
- After Initial Contact is Made: Within five days of contacting you, the collector must send a validation notice stating the amount of the supposed debt, the original creditor, and the process for disputing the debt. This letter will also include the statement that, “unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” If the agent has yet to be able to contact you, they are allowed to contact coworkers, friends, neighbors, etc., in order to get your contact information.
Your Rights as a Consumer/Debtor
It is really important to know your rights as the consumer and/or debtor so that you can ensure the collection agency is acting appropriately. Here’s what you should know:
- How to Dispute a Debt or a Portion of a Debt: To dispute the debt or a portion of it, send a letter of the dispute via certified mail to the debt collector within 30 days of being contacted by them. In order for them to legally continue with collection after receiving your dispute letter, they must first provide you with proof of the debt.
- How to Stop Workplace Phone Calls: Collection agencies may not call your place of work if they “know or have reason to know” that your employer prohibits calls. So tell them that your employer restricts non-work-related calls (well, if it’s true).
- How to Cease Collection Agency Communication: A Cease Communication Demand can be made in writing and sent by certified mail. After this, the agency may only contact you to confirm that it has stopped collection efforts or to advise you that it is pursuing other remedies to obtain payment.
- Obtain a Credit Report: You can obtain your credit report so that you can see what the collection agency is looking at. You may do this once per year for free through AnnualCreditReport.com.
- Check Your Statute of Limitation: On unsecured debts, each state sets a statute of limitations for how long someone can attempt to collect the debt by legal means. Each state is different (check out your state’s statute or the statute for the state where the debt was accrued at, but the average is six years. However, know that collectors are trying to get paid, not trying to take you through legal action in order to get the debt. So they are allowed to continue to collect from you even after the statute of limitation has been met; they just cannot take you to court to do so. (And they will not tell you if the statute of limitation has passed).
Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-335-7151.