How hard can credit card collector push?
- What the original issuer can do to collect the debt is a "gray area."
- Some states have their own laws that protect consumers from harassment.
- Consumers are never thrown in prison for nonpayment of debts.
Most people have a good-faith intention to pay the charges they incur on their credit cards. But sometimes, consumers are so overwhelmed they realize they can't continue to make even the minimum payment on a particular card.
Sooner or later, most unpaid accounts are charged off and sold for pennies on the dollar to third-party collection agencies, but what the original issuer can do to collect the debt in the meantime is "sort of a gray area," says Bruce McClary, a former debt collector turned credit counselor and spokesman for ClearPoint Credit Counseling Solutions.
That gray area exists because the federal Fair Debt Collection Practices Act, or FDCPA, doesn't apply to the original creditor. However, some states have their own laws that protect consumers from harassment in such situations.
That said, here's a general look at what likely will and probably won't happen.
Phone callsCredit card issuers typically call people who've missed a payment and try to guilt them into catching up. These calls typically continue for 90 days, or about three months, until the debt is sold. At that point, the FDCPA kicks in and the cardholder is likely to notice an increase in the volume of the phone calls, according to Sarah Poriss, a consumer law attorney in Hartford, Conn.
"They get louder. They get a little pushier. They get a little more obnoxious, and the phone number changes," she says.
Account agingAs an unpaid debt gets older, or "ages," three clocks begin to tick: the 90 days until charge off, the state statute of limitations on debt collection and the seven-year period until the negative item drops off the consumer's credit report. Eventually, this passage of time can work in the consumer's favor.
"As a consumer, you want your account to go into default once you've determined that you cannot pay," Poriss says. "You don't want to renew your default."
Credit reportingUnpaid credit card accounts are fair game for negative credit reporting once they're 30 days late, though "30 days" may mean 30 calendar days or one month. That means consumers can expect an unpaid account to appear on their credit report and begin to hurt their credit score quite soon. Over time, the credit report will show the aging of the account and eventually that it has been charged off. Subsequent payments don't remove or repair a negative item that's been submitted to a credit bureau.
Demand lettersCard issuers typically send letters to the cardholder demanding payment. These demands may play on the consumer's guilty feelings, threaten to report the missed payment to the credit bureaus or offer to enroll the consumer in a hardship program through which the debt can be repaid, usually at a lower interest rate.