The Consumer Financial Protection Bureau (CFPB) debt collection complaints accounted for a significant portion of all consumer complaints received in 2022. With so many Americans seeking recourse against debt collectors, everyone should understand how federal laws and state laws govern the practices of these agencies and ensure consumer protection.
When you fail to pay back credit card debt or other types of debt, the original lender will usually try to collect it themselves and may even offer payment plans to help people pay their debts. However, if it goes unpaid long enough, they may decide that it’s unlikely that they will ever recover the debt.
At that point, the debt gets marked as a charge-off on your credit report, negatively affecting your credit score. Then, the lender may sell it to a debt collector who will take over trying to get the money from you. So, what can debt collectors do? The Fair Debt Collection Practices Act (FDCPA) dictates what practices debt collectors can employ to recover a debt. Some aggressive tactics are considered illegal. So, if a collection agency contacts you, knowing what’s OK and what isn’t is essential.
What Can a Collection Agency Do?
First, let’s look at what a debt collector is allowed to do.
1. Contact you even on social media
A debt collector may call you on the phone, send you a letter or email, text you, or even connect with you on social media and send you a direct message. However, they must be clear about who they are and not publicly post about you owing a debt. If an attorney is representing you, you can request that they only contact the attorney and not you directly. You can also request that they stop calling you, in which case they will attempt to communicate through other means. Collection agencies can also contact your family, friends, and boss, but only to find out essential details about you, such as where you live.
2. Give you important info about your debt
When a debt collector initially contacts you, you have the right to verify that the debt is accurate. The collector should provide “validation information” either verbally during your first phone call or on paper within five days of the first contact. This information must include the debt amount, the creditor’s name, how to contact the original creditor, and steps to take if you don’t believe the debt is yours.
3. Pressure you to pay up
Some rules protect you from being harassed by a debt collector (more on that below). However, they can contact you regarding debt repayment and even discuss a potential lawsuit to get you to pay off your debt.
4. Sue you
In certain instances, the debt collector can sue you for the money you owe. If this happens, you must respond immediately, personally, or through an attorney. Failing to respond could result in a judgment against you and wage garnishment.
5. Go after an expired debt
All consumer debts (including credit cards, student loans, and medical debt) have a statute of limitations, meaning the collection agency can no longer sue you. The statute of limitations period varies by state. However, it doesn’t mean you no longer owe the debt or don’t have to pay. So don’t be surprised if you hear from a debt collector about paying a “time-barred” debt.
6. Sell your debt
Just as your original creditor sold your debt to a collector, the collection agency might decide to sell it again if it can’t recover the total amount. If you eventually pay the amount you owe in full, get the agreement regarding that debt in writing and keep it as part of your records to prove it.
7. Negotiate
Your original creditor might not be too flexible when settling for less than you owe (unless you can prove you’re experiencing a significant financial hardship). Debt collectors sometimes buy debt for pennies on the dollar, meaning they could have wide profit margins. So, you may be able to work with a collection agency to settle for a portion of what you owe. Again, get any alternate arrangements regarding your debt in writing.
What Debt Collectors CAN’T Do
Now that you know what a debt collection agency can do, it’s important to understand what they’re not allowed to do.
1. Call you at odd hours
Debt collectors can only call you between 8 am and 9 pm. They’re also not allowed to call during times that would be inconvenient to you unless you permit them to do so. They can only call you about your debt up to seven times per week per person, including calls to you and your friends or family.
2. Show up at your job
It’s illegal for a debt collector to come to your place of work and demand payment. They also can’t call your work specifically about a debt unless it is unpaid child support.
3. Charge extra fees or interest
The terms of your original debt have to be upheld by future collectors. So, a debt collector can’t tack on any added interest or fees to the debt unless it says explicitly in the original contract that they can.
4. Threaten to take your stuff
A debt collector can only garnish your wages or take personal property by suing you in court and obtaining a judgment. If a collector threatens to take these actions but hasn’t formally filed a lawsuit, they are breaking the law. The only exception is if you owe money to the federal government, which isn’t required to obtain a judgment.
5. Collect a debt that isn’t yours
Mix-ups can occur. If a collector comes after you for a debt you don’t recognize, you can send them a dispute letter within 30 days and ask for validation information. Once the collection agency gets your letter, they must stop contacting you about the debt until they prove you owe it in writing.
6. Lie to you
Debt collectors can’t pretend to be someone else to trick you into paying your debt. That includes impersonating an attorney or government representative. They also can’t lie about how much money you owe or threaten to take legal action against you if they don’t have the authority.
7. Arrest you
Failing to pay consumer debt on time is not a crime that can land you in jail. So, collection agencies can’t threaten to have you arrested over a debt. However, remember that failing to show up if you receive a court order could result in the judge issuing an arrest warrant. You could also face jail time if you don’t pay court fines related to the debt or refuse to pay child support or taxes.
8. Harass you in any way
It’s against the law for a debt collector to threaten to harm you, use profane language, or repeatedly call you throughout the day.
How to Report a Debt Collector That Breaks the Rules
Suppose you’ve been contacted by a debt collector who breaks any of the above rules. In that case, your first step should be reporting them to the Federal Trade Commission (the FTC is responsible for enforcing the Federal Fair Debt Collection Practices Act (FDCPA). You can also report them to the Consumer Financial Protection Bureau (CFPB) and your state attorney general.
Dealing with debt collectors can be confusing and stressful. It’s helpful to work with an attorney who knows the ins and outs of debt collection practices, especially if you’re wondering how to handle a time-barred debt or potential lawsuits. And in the case of a debt collector that violates your rights, an attorney can walk you through whether it’s appropriate to file a lawsuit of your own. For legal advice, contact the Tayne Law Group by calling (866) 890-7337 or filling out our short contact form to get a free consultation and learn about your options.
