Dealing With Debt Collection

Debt Collection, Money, Personal FinanceIt happens to most of us at some point in our live, we fall into debt. In my case it was out of stupidity and indifference. In your case it may be due to circumstances outside of your control. We avoid the debt as it accumulates and then it gets out of hand.  Eventually, our debt may be turned over to a collection agency and what was a small problem because a giant pain in the butt!

It was a long time ago, but I still recall my challenges with a couple of collectors. My experience was not bad for the first phone call, but the second, third and remainder were always tough. I recall threats, raised voices and being made to feel like the failure that I was (it was only my fault!). I recall being scared by threats of the effects that my delinquency would have on my credit and future.  Recently, I learned that the collections agencies I dealt with violated the Fair Debt Collection Practices Act. It is a little late for me to address it. If you have debt that has been turned over to collections, it is not too late for you. Be prepared by knowing the law.

The Federal Trade Commission receives more complaints about debt collection agencies than any other industry. In 2007 the FTC received 70,951 complaints from consumers about debt collection agencies.

How do your protect yourself from unfair collection practices?

The good news is you are already protected by the Fair Debt Collection Practices Act.  Knowing these rules is what will enable you to hold the collectors accountable. What are your rights to make sure collectors do not take unfair advantage of you? Here is a summary of key facts:

This article was featured in the Carnival of Debt Reduction. Please check out this carnival for many other great articles about personal finance.


Finding You:

In an effort to find you for the purpose of collecting on a debt, collectors may contact your friends, family and neighbors. However there are limits on what they can say and what they can ask. If your neighbor asks and only if your neighbor asks, the collector must identify their employer but they are not allowed to divulge the fact that you owe a debt. Furthermore, they are generally only allowed to contact your friends once, unless you buddy invites them to call back.

Are you represented by an attorney? Once  a collector is made aware of this fact, they are  only allowed to contact your attorney and nobody else.

Validation of debt:

Within five days of contacting you, a collector is obligated to send you written notice that provides:

(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a 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;
(4) a statement that if the consumer notifies the debt collector
in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector
will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

Look at this stage of the debt collection process as an opportunity. If you dispute your debt and or request details of your debt this will give up to 30 days to begin saving money or making necessary arrangement to address the debt.

Threats or abusive behavior is not allowed:

Collectors cannot threaten you in an effort to collect. They many not infer physical violence or threaten to harm your reputation or property. Collectors cannot use foul language or suggest they will publish your name or other details of your debt publicly. They cannot call you repetitively or continuously with the intent to annoy you.

Communicating with you:

Collectors cannot call you before 8:00 a.m. or after 9:00 p.m. Ideally they will only contact you personally at home. The will however contact you at work unless they are made aware that your employer or supervisor will not allow these calls.

Do you have routine responsibilities, attend regular doctor appointments or have kids sleeping on routine? If there are there other times of the day that are inconvenient for you to communicate explain this to your collectors, they are obligated to make an effort to communicate with you only at your convenience, not theirs.

Conclusion

If you are facing debt collectors you must take it very seriously. While this post provides a nice summary, you will want to read every line of the rules and regulations that govern both you and the collector in this action. Link here to review the Fair Debt Collection Practices Act.

Readers: Have you ever been harassed by debt collectors? Have they ever violated the rules? Please share your experiences in the comments section so that we can all learn from the experience.

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photo by walknboston

7 comments to Dealing With Debt Collection –

  • I usually get the call from a frantic family member after the collections has gone to some debt collecting garbage law firm. The only thing I would add, is never, ever throw anything you get from a law firm or even the collections company away!
    .-= Evan´s last blog ..Why Does Everyone Hate on Financial Planners? Defending Financial Advisors =-.

  • To add on to what Evan said, and I agree, any paperwork that one receives from a debt-collection agency should be filed and kept in a safe place. It’s a shame that things may come to this in some people’s life and I feel that credits cards are way to over-rated. To me, it is a never-ending process of pulling people further in debt. If one should have credit cards…I recommend only one. I also recommend not living beyond your own means.
    .-= Eric´s last blog ..A Simple Seo Tip =-.

  • The LeanLifeCoach

    @Evan – Great tip and you are absolutely correct. You’ve got to be able to cover yourself.

    @Eric – Living within your means is definitely a key to financial success. While credit cards can be a major headache they sure make life convenient. Of course you could also just rely on a debit card if you really wanted to.

  • I learn something new every time I visit your site, Coach. I didn’t know there was a Fair Debt Collection Act. Would you have been allowed to deal with the company you had a debt with after it went to collections or was it too late by then? When I was researching things to invest in years ago I found a government site (can’t remember which one now) that was auctioning off debts for pennies on the dollar. The money was tempting but I couldn’t see myself in the debt collection business.

    I got a letter a couple of years ago from a doctor’s office threatening to send us to collections for a disputed bill where the remaining balance was less than $5 – doesn’t it cost them more than that to send something to collections? I remember thinking it cost them that much to pay someone to type up the letter and mail it.
    .-= David @ MBA briefs´s last blog ..Exactly why you need a will =-.

  • The LeanLifeCoach

    @David – I am still doing some research… keep an eye out for the answer to your question.

    You are right about the cost of collecting. Likely the doctor/decision maker has no idea that their employees are wasting the time for a $5 debt. The associates of course are doing what someone told them to do, process the bills. That’s what we get when we create traditional command and control business management structures.

  • […] Eliminate The Muda! discusses how to deal with debt collection. […]

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