Your rights when dealing with bill collectors

Collection agents may not:

• Call before 8 a.m. or after 9 p.m.
  
  
• Talk to anyone but you (or your attorney, if you have one) about the debt.
  
  
• Threaten to garnish wages or seize property unless they actually intend to do so. Garnishment is illegal in some states, and in others requires a court order. In many cases, property seizure is not permitted. Check with your state attorney general's office or state consumer protection office to find out what is legal in your state.
  
  
• Threaten to sue unless they are actually taking legal action. In some states, third-party collection agencies may not sue.
  
  
• Threaten you with arrest or jail.
  
  
• Use obscene language.
  
  
• Annoy or harass you with repeated calls.
  
  
• Call at work if you have asked them to stop.
  
  
• Lie about their identities. They must give their real names and the name of their company. They may not falsely claim to be an attorney, a representative from a credit bureau or a member of law enforcement.

Ideally, a collections call should be no different than the calls you make at work each day.

"It should be a business call," says Kathy McNally, vice president with the National Foundation for Credit Counseling.

Instead, some consumers are berated, made to feel guilty or worthless, or goaded into anger or tears.

"What I tell my clients is that collections agents are pretty skilled in pushing psychological buttons," says Joanne S. Faulkner, a consumer law attorney based in New Haven, Conn. "They get you mad so that you say something they can use ... or they'll make you so desperate you'll promise them something."

But you don't have to take anyone's abuse. Here are some things you can do:

Remedy #1: Don't take the calls. You can hang up, screen calls or stop them from calling entirely with what's known as a "cease and desist letter." If you send a "cease and desist," include your name, address and account number, and tell the company "do not contact me further about this debt." Send the letter certified so that you have proof the company received it. But this move doesn't cancel your debt. The original creditor or the collection agency may decide to sue, or the creditor can simply hire another third-party collector.

Remedy #2: Keep a diary. If you do take the calls, write everything down: dates, times, names (even if it's the ubiquitous Ms. Smith or Mr. Jones) and what is said. If it's legal in your state, tape the exchange. And if you tell them you're taping the call -- whether you are or not -- they will be more likely to behave.

Remedy #3: Negotiate to pay the debt. Once a debt goes to collections, you may be able to work out a deal to pay less than the full amount. "A collections agency is always authorized to take something less than 100 percent," says Faulkner. "Usually 50 to 60 percent."

Whether you pay in full, negotiate for a percentage of the debt or accept a payment plan, and get everything in writing before you give them any money.

Make them stipulate that they will not report anything negative to the credit bureaus regarding the debt. And have your original creditor sign off on the deal. A collection agency could offer to settle that $1,000 credit card bill for just $500. But once they're paid, the original creditor can still come after you for the other $500.

One warning: If you negotiate a settlement for less than you owe, you could end up paying taxes on the unpaid portion. But if the unpaid amount is less than $600, a collection agency does not have to report it to the IRS. Make this part of your written agreement.

Always pay with paper checks -- not electronic bank drafts by phone or debit cards. It's to your advantage to have a physical record that you've paid, plus you control exactly what you're paying and when. Faulkner had one client who authorized a $300 draft from his bank account, only to have collection agents take $500. "He didn't have $500 and had to change bank accounts so that they wouldn't do it again," she says.

Be sure to get something in writing when the debt is paid. "That way, if it does come up on your credit report, you have something to prove it was paid," says Joyclyn Kyle, director of housing for the Philadelphia office of the Association of Community Organizations for Reform Now.

Remedy #4: Understand the laws in your state. Garnishment, lawsuits and property seizure are illegal in some places, which gives you a little more leverage to work out a deal. To learn what is and isn't allowed, call your state Attorney General's office or the state consumer protection office.

But third party collectors have a choice: they can operate under the laws of your state or those of the state where the debt originated, usually interpreted as where you were living when you opened the account, says William Haynes, attorney with the FTC's division of financial practices.

Also, time may have run out on the debt. While there is no federal statute of limitations on debts, most states limit the amount of time a creditor has to collect a debt. However, that deadline varies from state to state.

There is also a question of which state's rules govern the transaction, yours or the creditor's. That's a very gray area, notes David A. Szwak, an attorney who specializes in consumer credit litigation and testifies as an expert in similar cases. He recommends that consumers check with their local state authority or an attorney in their state who specializes in this kind of law.

Remedy #5: File a complaint. If you suspect that a collection agent has crossed the line, call the FTC and your state's governing office and file complaints. (Yet another reason it's good to keep a written or tape-recorded diary.)

Remedy #6: Sue. If a third-party collection agency violates your rights, you can sue for actual damages and punitive damages, as well as attorneys' fees and court costs. To find a lawyer who specializes in consumer credit law, contact the National Association of Consumer Advocates.McNally believes that most collectors stay well within the bounds of the law. When they don't, she says, "It's really important for all of us to stand up for ourselves."