Consumers who default on loans or don’t pay their debts are subject to collection services. The original creditor follows all legal avenues to collect the outstanding balance, including taking legal action against the consumer. When all efforts to collect are exhausted, the original creditors either file for a loss through their insurance provider and/or sell the account to a collection agency. Consumers who aren’t aware of their rights and want to set boundaries to discover how far a debt collector can go legally.
Starting the Collection Process
According to federal laws, debt collectors must provide a written letter through the US Postal Service within 5 days of the first collection call. The laws apply to third-parties and collection agencies, and they don’t apply to a creditor who has been trying to collect on their own accounts. The written statement or invoice must provide the original balance, the creditor’s name, and the date in which the collection agency started through attempts to collect.
Collection agencies are within their rights to increase the amount of the original payment. Typically, the original creditor sells the account to the collection agency and collect a cash payment from the collection agency. In turn, the collection agency follows tactics to collect any portion of the debt and avoid a financial loss. However, collection agencies don’t have the same legal rights as the original creditor. Under the law, the original creditor has the right to take legal action to collect the debt, and the original creditor can use tactics that collection agencies cannot. When reviewing your rights as a consumer, you can discuss credit-related issues with National Debt Relief now.
Taming Harassing Phone Calls
According to federal laws under the Fair Debt Collection Practices Act, debt collectors aren’t allowed to call before 8 am or after 9 pm. There isn’t a law that dictates how many times the collection agency calls within each hour. However, any consumer who feels that the collection agency has called too much can file a report with the Federal Trade Commission. The law allows the consumer to contact the debt collection agency in writing and request that the collector stops all telephone communications. It is vital for the consumer to send the request via certified mail and get evidence that the collection agency has received the letter. If the debt collector contacts them after receiving the letter, the debt collection agency is breaking the law.
Debt collectors cannot use any unpleasant speech when contacting a consumer. If the debt collector uses any vulgar language, they are breaking the law and creating unnecessary hostility. Threats of bodily harm, employment termination, or even deportation are unlawful. Consumers should collect all details about the harassing phone calls and provide the information to their attorney.
Presenting False Information or Statements
All consumers have the legal right to review their credit reports at any time. If they find a debt that doesn’t belong to them, the consumer has the right to file a dispute through each of the credit bureaus. There is a dispute button on each of the credit bureau’s websites. Consumers enter information about the debt, such as it doesn’t belong to them or the amount is inaccurate. The credit bureaus will conduct an investigation and report the findings back to the consumer. If the credit bureau proves that the account is fraudulent, the listing for the account is removed from the consumer’s credit report.
Getting Third-Parties Involved in the Collection Efforts
According to the federal laws, it is possible for a debt collection agency to contact anyone connected to the account holder. This includes their family, close friends, and even their employer. However, the laws prevent the debt collector from discussing the debt or anything connected to the debt with anyone other than the account holder. Laws are in place to protect the privacy of all consumers and prevent creditors and collection agencies from providing any personal information to anyone other than the consumer whose name appears on the account. If the credit agency provides any details, the debt collector explains anything related to the debt, they broke the law and violated the consumer’s right to privacy.
Laws prevent debt collectors from coming to your place of employment and harassing you. Consumers have the right to contact law enforcement if any debt collector comes to their job in an attempt to discuss a debt or any other matter. If the debt collector answers a third-party’s questions about your debt, the debt collector is breaking the law.
When the Consumer Gets an Attorney
Once the collection agency has been informed that you have an attorney, the collection agency must stop all communications with you. Consumers are protected against unlawful tactics followed by the collection agencies including any attempts to contact a consumer who is represented by an attorney. Once it has been established that an attorney is involved, all communications must go through the lawyer only.
The Threat of Legal Action
Federal laws protect consumers against debt collection agencies and their threats. According to the law, the original creditor is the only entity that has the legal right to seek legal action. A collection agency cannot take legal action or file a lawsuit to collect any outstanding balance. However, the collection agencies love to threaten consumers implying that they will garnish the consumer’s wages, take them to court, or file criminal charges.
First, the only party that can start and approve any wage garnishments is the court. If the collection agency took the case to court, the court would send the consumer a notification about the lawsuit and give them time to seek legal counsel. If the court hasn’t sent you any legal summons or information about a lawsuit, you can rest assured that the debt collectors haven’t started a case. Even if the collection agency is successful in filing or winning a lawsuit, it is less likely that the court will allow wage garnishment.
Secondly, the only way a consumer could face criminal charges for a debt is if they are guilty of identity theft or they committed any form of fraud to obtain the account. Criminal prosecution is not an outcome for failing to pay your own debt. The US government doesn’t use debt’s prison to punish anyone who defaulted on their own loan or didn’t pay all of their payments for a credit card account.
The Statute of Limitations
All states have their own statute of limitations when it comes to debts. Typically, if an account is charged off, such as a credit card account, the statute runs out in about seven years. Closed accounts appear on the consumer’s credit reports for a period of up to seven years following the closure by the creditor. Once the account is no longer on the credit report, the statute of limitations has expired in most cases.
However, once an account is sold to a collection agency, the collection agency can relist the debt on the consumer’s credit reports. The listing can appear on the credit reports for an additional seven years unless the consumer pays off the account. Once the account is paid in full, the listing for the collection agency and the original creditor can be removed by the credit bureau, but the consumer must submit their request through all three credit bureaus.
The original creditor cannot take legal action once the debt has been closed for at least ten years. It doesn’t matter how much they threaten the consumer in an attempt to collect. The consumer is protected by the statute of limitations and can request a stop to all communications. Additionally, any creditor that has sold their account to a collection agency cannot make any further attempts to collect the outstanding balance even if they didn’t get their full balance from the collection agency. This yet another scare tactic that is used by creditors.
The laws apply to all different types of consumer debts, including credit card accounts, mortgage loans, and personal loans. All creditors and collection agencies must follow the law when trying to collect the outstanding balance. However, if the statute of limitations has expired, creditors and collection agencies don’t have legal footing and cannot start any legal claims.
Avoiding Scam Artists
It is advised that any consumer who receives a letter from a collection agency should verify the company and the debt. Consumers should never provide immediate payment to these individuals until they know for a fact that the collector is, in fact, legitimate. The debt collector should have vital details about the debt.
Consumers who are facing debt collection efforts must learn about their legal rights and take steps to prevent unethical practices. All debt collection agencies face restrictions on how they can contact a consumer. Consumers have the right to request in writing to have calls stopped completely. Any threats of legal action give consumers the right to report the agency to the Federal Trade Commission and other federal agencies. By knowing your rights, you can protect yourself against legal action and stop unethical debt collectors from continuing to mislead others.
