Five things the law prohibits debt collectors from doing
The Fair Debt Collection Practices Act was passed in 1977 to protect consumers’ rights. The Act prevents debt collectors from harassing and threatening consumers. This gives consumers options to legally dispute a debt they owe. The FDCPA covers personal debts such as medical bills, mortgages and credit card debts that have been sold to a debt collector. However, it does not cover business debts, and it does not cover creditors contacting consumers directly.
Consumers who are being contacted by debt collectors need to understand their rights are in this situation. Here are five actions debt collectors are prohibited by law from taking.
1. Make false statements
Debt collectors are required to disclose the fact that they are debt collectors and to reveal the legal name of their business. It is illegal for a debt collector to use a fake business name or to claim that they represent a government agency, an attorney or law enforcement. Claiming to work for a credit reporting agency is also illegal.
Other common false statements include misrepresenting a document as a legal form, or conversely, claiming that a legal form is actually not legally binding. Debt collectors cannot claim that they will seize wages, property or benefits if the debt is not repaid.
2. Make legal threats
Debt collectors might try to pressure debtors into making a payment by claiming that they can be arrested or are facing criminal charges. The truth, though, is that debtors do not face any legal repercussions until a creditor or debt collector files a civil lawsuit against them. If this happens, a debtor will receive an official notice from a court.
If the court rules in favor of the debt collector, the debtor will have to repay the debt. Wages can be garnished and a lien can be placed on assets if the debt is not paid off within a certain time frame. However, there will not be criminal charges or jail time.
3. Share a consumer’s personal information
The FDCPA protects consumers’ privacy. For instance, debt collectors cannot send postcards with information regarding debt collection, as that information might be visible to people other than the debtor.
Debt collectors are legally allowed to contact a third party such as a family member or employer to ask for a current address, a phone number or a debtor’s workplace. However, they are prohibited from repeatedly contacting a third party.
Debt collectors cannot reveal any details pertaining to a debt except when communicating with the debtor, their spouse or an attorney hired to represent them.
4. Attempt to collect a debt that does not exist
The FDCPA requires debt collectors to issue a verification notice within five days of contacting a debtor. This validation notice should include details regarding the amount owed and how the debt was incurred. This is required in order to keep debt collectors from attempting to collect a debt that does not exist.
They might try to do so for a number of reasons, either purposeful or accidental. For example, mistakes can happen when a file is transferred from the original creditor to the debt collector. Some collectors will even purchase debts from other collectors, which increases the risks of mistakes. There might be a mistake regarding the identity of the debtor, or a debt collector might purchase a debt that has already been paid off or discharged after the debtor filed for bankruptcy.
Consumers who are dealing with debt collectors but have not received a validation notice should request one via certified mail with a return receipt. A debtor has 30 days to respond to the validation notice if they wish to claim that they do not owe the debt or wish to request not to be contacted about collecting the debt.
The ability to request a validation notice is important because it helps consumers verify that the debt collector is a legitimate agency and not a scammer posing as a debt collector in an effort to steal money and personal information.
Reviewing the amount of the debt and how it was incurred is also important. A debtor is legally obligated to pay a legitimate debt, but is not required to pay fees that were not agreed upon in the original contract with the creditor. A debtor would be responsible for late fees and interest as long as they correspond to the fees disclosed in the original contract. However, debt collectors cannot add a collection fee on top of the debt owed.
5. Harass debtors
The FDCPA describes harassment in detail in order to protect consumers. A debt collector does not have to directly threaten or insult a consumer in order to break the law. Repeatedly calling a person, ignoring their requests not to be contacted and calling them at inconvenient hours is considered to be harassment under the FDCPA.
Debtors have the right to send a written request to a debt collector to ask for communications to cease. They can request not to receive calls at work, not to receive calls during certain hours or not to be contacted by mail. To do so, debtors should send certified mail with return receipts to prove that they sent a request not to be contacted and keep records of communications with debt collectors, especially if the debt collection agency is using practices considered to be harassment under the FDCPA.
If a debt collection agency breaks the law, a consumer has one year to sue them. This will not make the debt go away, but the consumer can be awarded $1,000 or more in damages if they can prove the debt collector’s unethical practices resulted in a loss of wages or in medical bills.
Consumers have specific rights when dealing with debt collectors. If a debt collector uses threats or harassment or tries to collect a debt that does not exist, the debtor should send a written notice to stop communication and get help from an attorney or a debt relief professional to settle the issue. Potential solutions include disputing a debt that does not exist, filing for bankruptcy or creating a settlement fund to make a lump sum payment to the debt collection agency.