A consumer guide to debt collection: Frequently asked questions

What governmental agency oversees debt collectors?

Debt collectors/debt collection agencies, known collectively as creditors, are overseen and regulated by both the federal government and state governments. The agency responsible for oversight and regulation of debt collectors on a national level is the FTC.

What is the FTC?

The Federal Trade Commission (FTC) is a federal agency that, as part of its charter, is responsible for the protection of consumers. As part of its responsibilities, the FTC is charged with reinforcing the Fair Debt Collection Practices Act (FDCPA).

What is the FDCPA (Fair Debt Collection Practices Act)?

The FDCPA is a statute that is part of the Consumer Credit Protection Act. The FDCPA prohibits debt collectors from using unfair, abusive, illegal, or deceptive practices in order to collect debts from borrowers.

What is a debt collector?

Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes debt collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them. The FDCPA does not apply to the original creditor, only to those engaged in the process of debt collection. Note that some states have enacted legislation that also regulates original creditors with regard to their collection practices in the same fashion as third-party debt collectors.

What types of debts are covered by the FDCPA?

The FDCPA covers personal, family, and household debts, including money that is owed on personal credit card accounts, auto loans, medical bills, and mortgage debt. Note that the act does not cover debts incurred as part of running a business.

Is a debt collector allowed to contact me any time or any place?

The answer is no. Debt collectors may not contact you at inconvenient times, such as before 8 o’clock in the morning or after 9 o’clock at night (your local time), unless, of course, you are willing to take and agree to receive such contacts. Debt collectors are not allowed to contact you at your place of employment if they’ve been informed (either verbally or in writing) that you are not permitted to receive calls or contacts at your place of work.

How can I stop debt collectors from contacting me?

Should you be contacted by a debt collector about a debt, before just cutting them off, you may want to try to resolve the matter through dialogue. First, try to determine if they are contacting you about a legitimate debt that you actually owe. After speaking with them, if you don’t think the debt is actually owed by you (either whole or in part), inform them of such and ask them to research it further. If you owe the debt, but can’t repay the debt in a timely fashion, you may wish to discuss better terms or special terms with the collector. If you decide after interacting with the debt collector that you don’t want him or her to contact you again, you must provide them with a written request that they not contact you further. Until you do this, they are free to continue contacting you about the debt.

How do I inform a collector that I don’t want to be contacted?

In order to officially inform a collector that you do not wish to have them contact you any further, you must write a “no contact” letter to the creditor. A “no contact” letter clearly identifies who you are and plainly states that you don’t want to be contacted by them at all. Be sure to make a copy of your letter and then send the original letter via certified mail from the post office. You should also consider paying for a “return receipt” so you will have proof that the debt collector received your request. Note that a verbal request does not count. You must inform them of your desire in a written letter.

What will happen when the collector gets my letter?

Once a debt collector receives your request that they not contact you, they are prohibited from contacting you again. In most cases they will honor this request. If they do not, contact the FTC or your state Attorney General’s office. There are two exceptions to the “no further contact” rule: 1) A debt collector may contact you to tell you that they will not contact you further; and 2) A debt collector may contact you to inform you that they are taking action against you (such as filing a lawsuit).

Will the “no contact” letter get rid of my debt?

No. Sending a “no contact” letter does not relieve you of your obligation to pay your debt. While it should stop the debt collector from contacting you, they may still pursue action against you (such as bringing a lawsuit against you) to collect the money you owe.

Can a debt collector contact anyone else about my debt?

If you are represented by an attorney with regard to the debt in question, the debt collector may not contact you and must contact your attorney. A collector may also contact other people who know you, but they may only do this to find out your home phone number, your address, and where you are employed. Note that debt collectors are, for the most part, prohibited from contacting these third parties more than once.

Can a debt collector discuss my debt or other personal items with third parties?

The answer is no. Other than to obtain basic location information about you, a debt collector is typically prohibited from discussing your debt or other personal information about you with anyone other than you or your spouse (or, if you are represented with regard to the debt, your attorney).

What is a debt collector required to tell me about the debt?

Note that every debt collector is required to send you a written “validation notice” within five days after they first contact you. The “validation notice” must include the name of the creditor you owe the money to, the amount of money you owe, and what you should do if you don’t believe that you owe the money to the creditor.

If I don’t think I owe any money, can the collector keep contacting me?

In the case that you don’t believe you owe the debt, once you have been contacted by a debt collector, you must then send the collector a letter stating that you don’t owe any or all of the money. Once the collector has received this letter, they must cease contacting you. If you don’t believe you owe the debt, you should also ask for verification of the debt in that letter. Note that you must send the letter within 30 days after you receive the validation notice (see above). A debt collector can begin contacting you again if they send you written verification of the debt. This could be a copy of a bill, receipt, invoice, or other documentation.

What types of practices are prohibited for debt collectors?

General Harassment. Debt collectors are specifically prohibited from harassing, oppressing, or abusing you or any third parties they contact in the attempt to collect on a debt. For example, they may not:

  • Publish your name on a “bad debt list”. This is a list of names of people who refuse to pay their debts that is published publicly (Note that debt collectors are allowed to give your credit information to the credit bureaus);
  • Use loud, aggressive, obscene or profane language; or
  • Use the phone repeatedly to harass or annoy you.

Make false statements. Debt collectors may not lie to you when they are trying to collect a debt. As examples, they may not:

  • Falsely claim that they are government representatives, attorneys, law enforcement officials, or anything else other than what they are;
  • Falsely claim that, in some fashion, you have committed a crime;
  • Misrepresent the amount you owe;
  • Misrepresent that they work for a credit reporting company;
  • Falsely indicate that papers they send you are legal forms if they aren’t; or
  • Falsely indicate that papers they send to you aren’t legal forms if they are.

Misleading practices. Debt collectors are prohibited from:

  • Giving false or inaccurate credit information about you to anyone; and most specifically any credit reporting organization;
  • Sending you anything that appears to be an official document from a government agency, civil court or other “official body” if it isn’t; or
  • Using a false company name.

Threats. Debt collectors also are not allowed to imply or say that:

  • You will be arrested by the police or other agency if you don’t pay your debt;
  • You will be injured or that any other violence will occur toward you;
  • They will report false information to credit bureaus to harm your credit;
  • They will garnish or attack your wages unless they are permitted by law to do so and they intend to take such action;
  • They will seize or sell your property unless they are permitted by law to take the action and intend to do so; or
  • Legal action will be taken against you if they don’t intend to take the action or if doing so is illegal.

Unfair practices. Debt collectors are prohibited from engaging in unfair practices when trying to collect a debt. For example, they may not:

  • Attempt to charge for services or collect any fees, interest, or other charges that add to the amount you owe unless state law allows the charge or the contract that created your debt specifically provided for the charge;
  • Contact you through the use of a postcard or other “embarrassing media”;
  • Use symbols or other messaging on an envelope sent to you other than the address of the debt collector;
  • Use the name of the debt collector, if the name in any way indicates that the collector is in the debt collection business;
  • Take or threaten to take your personal property unless doing so is provided for under the law; or
  • Deposit a post-dated check for the payment of a debt early.

Do I have control over which debts my payments should apply to?

Yes, you do. Should you be in the position where a collector is trying to collect more than one debt from you, the collector must apply any and all payments that you make to the debt you choose.

May a debt collector apply a payment to a debt that I don’t think I owe?

No, they may not. Debt collectors may not apply a payment to any debt that you don’t believe you owe.

Can debt collectors attack or garnish my wages or bank account?

The short answer is no unless they have permission to do so from a court. The only way that a debt collector can garnish your wages or your bank account is by a court order. Should you not pay a debt, the creditor to which you owe the debt (or the creditor’s debt collector) may sue you to collect on the debt. If they win the lawsuit, the court will enter a judgment against you. A court-ordered judgment will state the amount of money you owe, and will give the creditor or the debt collector the right to obtain a “garnishment order” against you.

What is a garnishment order?

A garnishment order is a court order that directs a third party (such as your bank or credit union) to turn over funds from your accounts to pay the debt. Wage garnishment is when your employer withholds part of your compensation to pay your debts. Again, your wages usually may only be garnished by court order.

What happens if a creditor or debt collector sues me and I don’t show up?

It is very important that you don’t ignore a summons for a lawsuit. If you do ignore a summons and you don’t show for your court date, you will lose your opportunity to fight a wage garnishment or bank-account garnishment.

Can creditors or debt collectors garnish my federal benefits?

By law, there are many federal benefits that are generally exempt from garnishment. These benefits include:

  • Social Security Benefits
  • Service Members’ Pay
  • Civil Service and Federal Retirement and Disability Benefits
  • Supplemental Security Income (SSI) Benefits
  • Veterans’ Benefits
  • Student Assistance
  • Railroad Retirement Benefits
  • Military Annuities and Survivors’ Benefits
  • Merchant Seamen Wages
  • Longshoremen’s and Harbor Workers’ Death and Disability Benefits
  • Foreign Service Retirement and Disability Benefits
  • Compensation for Injury, Death, or Detention of Employees of U.S. Contractors outside the U.S.
  • Federal Emergency Management Agency Federal Disaster Assistance

Note that, under certain situations, federal benefits may be garnished. The reasons that allow garnishment of these benefits include paying delinquent taxes, child support, alimony, or student loans.

What do I do if I think a debt collector is violating the law?

If you believe a debt collector has violated the law, you have the right to sue them in a state or federal court. You may do so within one year from the date the law was violated. If you wait longer than one year, in most cases you will not be able to sue the debt collector. Should you win the lawsuit, the judge may require the debt collector to pay for any damages you have suffered as a result of the illegal practices (such as lost wages). Additionally, the judge can require the collector to pay you up to $1,000 even if you have suffered no actual damages. You also may be reimbursed for court costs, attorney’s fees, and other expenses related to the lawsuit. In the instance where a debt collector has a pattern of violation among a number of people, you may join a group that has been victimized in a “class action” lawsuit.

What is a class action lawsuit?

In a class action lawsuit, a group of people join together to sue a debt collector as part of a class action. In this situation, the group may recover money for damages up to $500,000 or one percent of the collector’s net worth (whichever is lower).

If I win a lawsuit, does the debt go away?

No. If you sue a collector for any type of illegal practice and you win, you will still owe the debt.

What should I do in the event that a debt collector sues me?

Should you be sued by a debt collector to collect on a debt, you must appropriately respond to the lawsuit. This must be done either personally or through your attorney. Be sure to respond on or before the date specified on the papers you receive from the court in order to preserve your rights.

Where do I report a debt collector for an alleged violation?

If you believe that a debt collector has violated the law, report them to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov). Note that many states have their own debt collection laws. These may differ significantly from the FDCPA. To find out your rights under the law, contact your state Attorney General’s office.

Where do I find further information about this topic?

To learn more about debt collection and other credit-related issues, visit the Federal Trade Commission website at www.ftc.gov/credit.

Also… MyMoney.gov, is an excellent resource for consumers. It is the U.S. government’s portal to financial education.

Beware of debt settlement scams

It’s hard to believe, but thieves consider a person in financial trouble ripe for plucking. Con artists go after the most vulnerable people they can find and someone desperate for financial relief is, too often, more than ready to resort to extreme measures to get that relief. The key to avoid becoming the target of a con game is to do thorough research on any company you’re considering working with to make sure that they are not going to take advantage of you.

  • Are their promises “too good to be true”?
    Since the likelihood of money miraculously appearing from thin air is very small, it’s wise to view a debt relief company or credit counseling agency, that promises to make all of your debt-worries go away, with some skepticism. At best, you may be able to reduce your debt by 50% or so with a qualified debt settlement company (see below). But, if the company is promising that they’ll get rid of 90% of your debt, be suspicious.
  • Do they charge upfront fees?
    If a debt relief company offers to help you, but, wants to charge a fee for their services, it may be time to look somewhere else for help. Some companies will offer guaranteed debt relief for a price as high as $1000 then “negotiate” a smaller fee. A legitimate debt relief or credit counseling agency will not charge you for services that it has not rendered.
  • Do they inform you of your rights?
    A legitimate debt relief company won’t hesitate to inform you of your rights. Some companies will provide a brochure detailing your rights under federal and state law and their debt counselors will go over these rights, point by point to make sure you are informed. The reason a real debt relief company goes through these hoops is due to the complex legal processes that are involved in getting your debt under control. Creditors need to be compensated while you need to remain solvent in order to meet your financial responsibilities further down the road which is a very delicate financial and legal balancing act.
    Unscrupulous companies will do everything to keep you from knowing your rights. They might convince you that your legal rights are too complicated to explain or, to make things go quickly, you don’t need to worry about such details ̶ after all, they’re only there to look out for your rights.

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