Think because you’ve fallen behind on paying your bills that a debt collector can harass you? Think again.
The good news: Debtors have rights, thanks to a federal law called the Fair Debt Collection Practices Act (FDCPA), which covers such personal and household debts as credit card debts, auto loans and mortgages. The bad news: Many debtors still find themselves the target of abusive debt collection behavior.
Debt collection is a reality for millions of Americans. About 77 million people, or 35 percent of adults with a credit file, have a report of debt in collection, according to a study by the Urban Institute.
And more than one in four consumers contacted by debt collectors felt threatened, according to a recent survey by the Consumer Financial Protection Bureau (CFPB), even though debt collectors are generally prohibited from tactics that harass, abuse, or oppress debtors.
The FDCPA defines a debt collector as someone who regularly collects debts owed to others. This includes collection agencies, attorneys who collect debts, and companies that buy delinquent debts from original creditors and then try to collect them.
Debt collection has become a multi-billion dollar industry, with more than 6,000 debt collection firms estimated to be operating in the U.S., according to the CFPB. Most debt collectors are compensated based on how much they collect, which can create “serious incentive problems,” CFPB director Richard Cordray, said in recent speech.
The CFPB says it receives more complaints about debt collectors than about any other financial product or service.
“The more companies there are involved in debt collection, the greater the chances some are operating in violation of the Fair Debt Collection Practices Act,” noted Bruce McClary, a spokesman for the National Foundation for Credit Counseling, who formerly worked for a debt collection company.
If you borrowed money, whether it was to purchase a home, or to fund an education, you are obligated to pay it back. Responsible debt collection, when done fairly, is an essential part of the financial marketplace.
Related: How to Zap Your Debt
However, as a debtor, you have certain rights and recourse if you feel you have been treated unfairly. Here are five things you need to know.
A number of practices are off limits. Among the things not allowed: A debt collector can’t threaten you with violence or harm, can’t publish a list of names of people who refuse to pay their debts, and can’t use obscene or profane language.
In addition, debt collectors are prohibited from making false statements. For instance, they’re not allowed to falsely claim that they are lawyers or government representatives, or lie and tell you that you have committed a crime.
“A debt collector may tell you a sheriff is going to come after you,” McClary said, but such statements are against the law.
Nor can debt collectors call you anytime they wish. Calls before 8 a.m. or after 9 p.m. are prohibited unless you request to be called during those times. Likewise, debt collectors may not contact you at work if they’re told that you’re not allowed to get calls there.
A debt collector must send you a written “validation notice” telling you how much money you owe, within five days after they first contact you.
The notice must name the creditor to whom you owe the money and it must explain what you should do if you don’t think you owe the money.
If a debt collector contacts you about a debt, you might want to engage in a conversation to see if you can resolve the issue. However, if you don’t want to hear from the debt collector again you can tell the collector, in writing, to stop reaching out to you.
Keep in mind, the debt you owe won’t vanish, just because you told the debt collector to stop contacting you.
If you don’t pay your debt, a creditor or a debt collector generally can sue you in order to collect. If they win, the court can enter a judgment against you. A judgment would allow the creditor or debt collector to get a garnishment order against you. That means a third party, like your bank, would be ordered to turn over money from your account to pay the debt.
In addition, your wages might be garnished, meaning your employer would be required to withhold part of your salary to pay your debts.
You have the right to sue a debt collector in a state or federal court within one year from the date the collector violated the law.
If you win, a judge can require the debt collector to pay you for any damages you can prove you suffered because of their illegal practices, such as lost compensation or healthcare bills.
McClary recommends keeping a log of all of your correspondence with a debt collector. This information can be useful in the event you decide to file a complaint.
Your voice matters: there have been several recent cases where the government has taken action against bad debt collection practices.
“There have been a number of high profile cases where debt collectors got caught,” McClary said. “Creditors were aware of how they were protected and knew what steps to take to turn over the debt collectors to the authorities.”
Click here to learn more about your rights under the Fair Debt Collection Practices Act.