Having credit card debt — or any kind of debt, for that matter — can create a significant emotional burden. And it only becomes more stressful when you start getting calls from a law firm about your debt. If a law firm calls you about your credit card debt, it’s important to understand your rights, your options moving forward, and what your first steps should be.
Understanding Why Law Firms Get Involved in Credit Card Debt
When you take out a credit card or a loan, you enter into a contractual agreement where you promise to repay the money you borrow. If you break that agreement by not paying your debt, your lender has the right to take legal action against you. If a lender or credit card issuer decides to go that route, it would likely hire a law firm to represent them.
The Role of Law Firms in Debt Collection
Most often, creditors and debt collectors hire attorneys when they want to take legal action against a borrower for failure to repay a debt. For example, if your credit card company decides to sue you, it would work with a debt collection attorney to file the lawsuit on its behalf.
A debt collection attorney or law firm may also help lenders and debt collectors before they reach the point of a lawsuit. For example, a debt collection attorney may send official communications from the lender to the borrower to attempt to collect the debt before involving the courts in the matter.
Common Concerns When a Law Firm Calls
When a law firm calls you regarding your credit card debt, your first steps should be ensuring the phone call and debt are legitimate and learning about your rights as a borrower.
Determining the Authenticity of the Call
First things first, it’s important to make sure the person on the other end of the phone is exactly who they say they are. Unfortunately, the debt collection industry is often targeted by scams. Before you move any further or give any information to the law firm, make sure the call is authentic — both that the attorney is who they claim to be and that they really represent the lender they claim to represent.
According to the Consumer Financial Protection Bureau, you should ask the person to provide their name, company name, company address, company telephone number, and professional license. You should also be on the lookout for these debt collection red flags:
- Threats of criminal charges
- Refusal to give you information about your debt
- Refusal to share their mailing address or phone number
- Invasive questions about your personal finances
Assessing the Legitimacy of the Debt
Lenders and debt collectors are legally required to validate or verify your debt within five days of first communicating with you. If you’ve received a call from a debt collection attorney, ask them to validate the debt, and they must provide their name and address, the name of the credit card company or lender, the amount you owe, including interest and fees, and your debt collection rights.
If you don’t believe the debt is yours based on the information in the debt validation letter, you can dispute the debt. However, if you find the debt is legitimate, you’ll have to consider some other courses of action.
Understanding Your Rights Under the Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act (FDCPA), which was initially passed in 1978, protects consumers against harmful debt collection practices. If you’re being contacted by a lender, collection agency, or attorney, it’s important to understand exactly what rights you have. Here are some rights you have under the FDCPA:
- Debt collectors must identify themselves.
- Debt collectors must validate your debt via written notice.
- Debt collectors can’t engage in harassment, false or misleading representations, or unfair practices to collect a debt.
- Debt collectors can only contact you between 8 a.m. and 9 p.m.
- Debt collectors may not contact you at a time or place they know to be inconvenient to you, including your workplace, if your employer prohibits such communication.
- Debt collectors can’t communicate with third parties about your debt.
- Debt collectors must cease communication if you request them to do so in writing.
In addition to the laws regulating what debt collectors (and debt collection attorneys) can and can’t do, know that you also have the right to hire an attorney to represent you.
Steps to Take When Contacted by a Law Firm
When you’re contacted by a law firm, here’s a summary of the first steps you’ll want to take before making any further decisions.
- Verify the Law Firm and Debt: Confirm the legitimacy of the law firm contacting you and the debt they’re contacting you about.
- Request Debt Validation: Request a written validation of the debt, which the original creditor or debt collector is required to provide you.
- Keep Records and Documentation: Maintain records of all communications with the law firm or lender — these may be necessary if legal action is taken.
Responding to a Law Firm’s Debt Collection Call
Once you’ve determined the law firm contacting you and the debt they’re contacting you about is legitimate, there are a few things to know about responding.
Communicating Effectively and Professionally
First, make sure you’re communicating professionally and respectfully at all times. The lender and its attorney will be more likely to cooperate or negotiate if you communicate effectively and treat everyone involved with respect.
Drafting a Written Response
When communicating with the law firm, sticking with written communication is helpful because it makes it easy to maintain thorough records. You can send written responses and request the law firm do the same. You may also need to respond in writing later on if the lender decides to pursue legal action.
Setting Up a Payment Plan
Once you’ve determined the debt is legitimate, you may decide to set up a payment plan for your debt. Making payments, even small ones, can help reduce the chances of your credit card company taking legal action against you. They may also be willing to negotiate on interest or fees if they see you’re willing to make payments and you may want to hire a local debt settlement attorney to help you.
Legal Options and Defenses
Whether your credit card company or debt collector has already sued you or not, it’s important to act diligently, knowing it may be a possibility. Here are some legal options and defenses to consider once the law firm contacts you.
Exploring Statute of Limitations
Credit card debt and other types of consumer debt have statutes of limitations, which is the amount of time after you take out a debt that a lender has to take legal action to recover the funds. The statute of limitations on debt varies by state, so it’s important to figure out the laws in your state. From there, you can look into your debt history to determine whether the statute of limitations has passed. If it has, you’ll have an easy defense if your lender decides to sue you.
Disputing Incorrect Debt Claims
If it turns out the debt the law firm is contacting you about isn’t yours, you can dispute it. First, you should contact the credit card company or lender to let them know the debt isn’t yours. If the debt appears on your credit report, you should also file a dispute with each credit bureau that has the debt listed on your credit report. You can dispute the debt even if it’s technically your debt, but has something incorrectly listed in terms of the loan amount, interest, etc.
Hiring Your Own Legal Representation
If a credit card company has hired an attorney to contact you about your debt, there’s a decent chance they’re considering taking legal action. For that reason, it may be a good idea to hire an attorney to represent you. A debt relief attorney can help communicate with the law firm on your behalf before a lawsuit, negotiate with your lender to attempt to settle your debt, or represent you in court if it comes to that.
Potential Consequences of Ignoring the Call
Unpaid credit card debt may not seem like that big of a deal, but it can have some significant negative consequences. Here are a few of the potential consequences to be aware of if you don’t repay your credit card debt or choose to ignore the lender’s communications.
Risk of Lawsuits
You entered into a legal contract when you took on your credit card debt. As a result, your lender has the right to sue you if you don’t hold up your end of the deal. As long as the statute of limitations hasn’t passed, your credit card company has a good chance of successfully suing you if you don’t repay your debt.
Impact on Credit Score
Debts in default or collections can have a significant negative impact on your credit score. Depending on your starting credit score, you could see it drop by as much as 100 or more points. This will become especially problematic if you need to apply for a new loan or access credit for some other reason, especially for a major purchase like a home.
Additionally, your credit score is used for other purposes, including signing up for insurance or renting an apartment. Having credit card debt in collections could negatively impact all of these things.
Possible Wage Garnishment
If your credit card company sues you and a judgment is issued against you, you could have your wages garnished to repay the debt. Unfortunately, this process is court-ordered, and there’s little you can do to stop it.
The good news is you can avoid wage garnishment and other legal troubles by being proactive about your debt. If you have unpaid credit card debt and have been contacted by a debt collection attorney, take steps early to set up a payment plan for your debt or work with a debt help attorney to assist you in the process to negotiate a settlement that you and the creditor or debt collector can both agree to.
