Photo: pasukaru76 via Flickr
Debt collectors can be scary: the endless calls, the contacting your boss and the threats of a lawsuit. If you’re being hounded, or fear you will soon, you should know your rights and what the law actually permits collectors to do.
Know your rights. Make the calls stop by sending a letter explicitly asking the debt collector to cease contacting you.
The action won’t forgive your debt, but it will help you keep good documentation of the affair, which will be essential in case you go to court.
From the point of receiving the letter, the collector may only contact you to say he will stop reaching out to you or that he will be taking a specific action, like filing a lawsuit. If the collecting agency fails to comply with your request, you should file a compliant with the Federal Trade Commission.
Debt collectors aren’t allowed to threaten you or say they’ll have you arrested. You can’t be arrested for delinquent debts, and federal law specifically prohibits collectors from implying otherwise. They also may not threaten legal action unless they can and will take it.
Collectors may, however, call your boss to verify where you work. On a good note, your boss can say you’re not permitted to receive calls and the collectors must stop.
Also keep in mind collectors can only phone between the hours of 8 a.m. and 9 p.m., unless for some reason you tell them otherwise.
For more details, visit the U.S. Federal Trade Commission’s website and study the Fair Debt Collection Practices Act.
Verify your debt. Some vendors add hidden fees to your purchases. When you don’t hand over the extra cash, the vendors sell your “debt” to a third party that will hound you for the money.
Other times collectors come after you for debts that have already been dismissed under the statue of limitations. The limitations range from three to 10 years, depending on the state and type of debt.
Beware: If you pay a collector even a fraction of the dismissed debt, the clock restarts and you could get roped into paying the whole thing.
You should always ask for verification on your debt, which the collector must send within 30 days of the time you request it. It should include, at the very least, the original creditor and account number and the debt amount.
Give as little information as possible. Do NOT give away any of your bank account information, and know it’s illegal for a collector to garnish your Social Security or veterans’ benefits. Also know that some places states protect individual retirement accounts and unemployment benefits.
Set up a payment plan. If you do owe the money, then make a reasonable payment plan and try to negotiate down the amount. The older the debt, the more you’ll be able to drive down the balance. You can start as low as 10 cents on the dollar and then work from there.
Don’t settle. If a collection agency refuses to give up your case, and the debt proves bogus, go to court and fight it out. Collectors often win proceedings because of no-shows—but not because they’re right.
And whatever you do, don’t settle. Most of these payment plans have a catch: If you fail with one of the payments, you’ll owe the collector the full amount, including interest and court costs.