COLLECTION TACTICS. Debtor s have rights. A growing number of folks have lost their jobs during these

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Iris Joseph
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1 COLLECTION TACTICS Debtor s have rights A growing number of folks have lost their jobs during these troubled economic times and have fallen behind on their bills, thus falling prey to collection agencies or debt collectors (defined by the Fair Debt Collection Practices Act as any person who regularly collects debts owed to others, including lawyers who perform debt collection services on a regular basis). These debt collectors may demand payment on debts that the debtor can no longer afford to pay. They may harass the debtor over debts that have already been paid, or harass them over debts that may not be theirs at all. The Fair Debt Collection Practices Act ( FDCPA ) is a federal law passed by Congress to regulate the conduct of debt collectors. The FDCPA covers personal, family, and household debts, including debts associated with the purchase of a car, medical care, retail financing, first and second mortgages, and credit card debts. Even if money is legitimately owed, a debt collector s conduct is regulated by the FDCPA. The Federal Trade Commission ( FTC ) has the authority to enforce FDCPA policies. The FTC receives more complaints

2 regarding the debt collection industry than any other industry. Each year the FTC reports to Congress its FDCPA enforcement activities, including detailed consumer complaints to the FTC regarding alleged debt collector violations. In its April 2, 2010 annual report to Congress, the FTC reported more than 88,190 complaints received by it in 2009, which is an increase from the 70,951 complaints reported in We can only assume that that number will increase significantly in In a press release dated July 12, 2010, it was reported that the FTC issued a report entitled Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration stating that the system for resolving consumer debt collection disputes is broken and recommending state and federal litigation and arbitration reforms to improve the efficiency and fairness to consumers. Creditors Rights After negotiations, if the creditor and debtor fail to reach agreement on payment of a debt, creditors may look to secured or unsecured collateral. If the debt is secured by a mortgage pledging real property ( secured debt ), the creditor may foreclose on that mortgage and gain control of the real property. If the loan involves a credit card debt, the purchase

3 of a car, retail financing and the like ( unsecured debt ), the creditor may proceed with repossession of the asset. It is the collection of unsecured debts that are most often turned over to debt collectors. If the value of the asset is not enough to pay the remaining balance of a debt, the creditor may also file a judgment against the debtor or exercise the right to seize the asset. If a debtor is owed money by a third party, (employer, bank, etc.), the third party may be required to pay those funds directly to the creditor via a garnishment or levy. Laws governing garnishment of wages may vary from state to state. Debtor s Rights Section 1692 of Title 15 of the U.S. Code sets forth that There is abundant evidence of the use of abusive, deceptive and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to loss of jobs, and to invasions of individual privacy. This section further states that, A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. The Fair Debt Collection Practices Act statute was added in 1978 as Title

4 VIII of the Consumer Credit Protection Act in response to abusive conduct by debt collectors and is enforced by the FTC. In-house collection agents (credit card companies, department stores, etc.) are not regulated by the FDCPA to the same degree as outside debt collectors. For example, if you have a store credit card, and the store s own collection department contacts you, the FDCPA does not apply. But if the same store uses an outside debt collector to contact you in relation to the same debt, the outside debt collector s conduct is restricted by the FDCPA. There may be state laws, however, that restrict the conduct of in-house collection agents. Section 806 of the FDCPA prohibits the following actions by debt collectors against debtors: Conduct that would harass, oppress, or abuse any person in connection with the collection of a debt. Threats or use or other criminal means to harm any person. Obscene, profane, or abusive language, name calling, etc. Publication of a list of consumers who allegedly refuse to pay debts, except to report to a consumer reporting agency. Advertisement for sale of any debt to coerce payment of the debt. Contacting the debtor by telephone repeatedly or continuously with the intent to annoy, abuse, or harass Telephone calls without meaningful disclosure of the caller s identity.

5 Halting Harassment You should first research your state s statutes of limitation to enforce a debt, which could save you time, money and aggravation from the get go. If within 30 days after receiving written notice of the debt from a debt collector for a debt you do not owe, you may send a response stating that you do not owe the money. The debt collector must then cease contacting you. If you actually owe the debt, following the initial contact by the debt collector, you are required to send written notice by certified mail, return receipt requested, instructing the debt collector to cease further contact. Or, if you have an attorney, instruct them to contact your attorney instead. The debt collector may contact the debtor once more notifying him or her of the amount of money owed, the name of the creditor to whom money is owed, and what action to take if the debtor believes he or she does not owe the money. The debt collector may only inquire about the debtor s address, phone number, and where the debtor works. The debt collector may make only one inquiry about the debtor of any third party. Other Remedies. The debtor may report any misconduct by the debt collector to the Better Business Bureau, State Attorney General s Office,

6 or to the FTC Hotline ( ). If the debt collector violates provisions of the FDCPA, the debtor may file a complaint as well as a private lawsuit in a state or federal court to collect damages (actual, statutory, attorney s fee and court costs) from the debt collector of up to $1,000. Beware of debt relief services Last, but not least, there are companies out there today that promise to erase your credit card debt for pennies on the dollar. Not true! according to the FTC. Negotiation of these debts can be risky and have serious, long-term consequences for your credit report and ability to obtain future credit. Other companies target folks with poor credit histories with promises to repair their credit reports for a small fee. The fact is that no one can remove negative information from your credit report. It s illegal. You may also be tempted by ads that guarantee loans or credit cards regardless of your credit history. You ll likely discover that you will be asked to pay a fee just for the promise of a loan. If you are asked to pay a fee for the promise of a loan, you may be dealing with a scam. You will be issued a credit card with so many strings attached that its practically worthless.

7 In summary, you cannot welch on debts. Legitimate debt does not go away. BIO: Catherine W. Eagles, CP, of Richmond, Virginia, is a 20-year veteran paralegal. She received a Bachelor Degree summa cum laude from the School of Continuing Studies, University of Richmond. She served on the Executive Board of the Richmond Paralegal Association for many years and as President in 2008 and Ms. Eagles served a 3 year term as a member of the Continuing Education Council of the National Association of Legal Assistants ( NALA ), as well as Chairman of NALA s 2009 Convention held in San Diego, CA. She was also a participant in NALA s 2009/2010 Leadership Enhancement and Preparation Program.

CONSUMER. Dealing with Debt Collection Harassment

CONSUMER. Dealing with Debt Collection Harassment CONSUMER Information for Advocates Representing Older Adults National Consumer Law Center Debt collectors have been the most complained-about industry on the Federal Trade Commission s consumer website