Yikes! Collectors are calling
day and night
you're being hounded by bill collectors, you're not alone. Last year, an estimated
95,933 people were turned over to third-party collection agencies, according
to data from ACA International, the Association of Credit and Collection Professionals.
Don't be intimidated.
Debt Collection Practices Act protects you if your creditor has given your
account to a third-party collection agency.
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.
- 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
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
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
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."
-- Posted: Jan. 9, 2003