5 Facts debt collectors would not want you to know
By Steven Doyle, 24th May 2012 | Follow this author
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Posted in WikinutBusinessLaw
Consumer protection laws are an important part of any capitalistic economy. This article talks about some of the more important provisions under the FDCPA which an average consumer does not know about and debt collectors take advantage of.
- Introduction
- Collectors cannot contact you at work if you ask them not to
- Paying off debts in collection won’t benefit your credit score
- Collectors make baseless threats to scare you into paying up
- Collectors cannot talk about your debt with third parties
- Collectors are not allowed to collect debts belonging to dead relatives
Introduction
Financial hardship can come in many forms. You might have just lost your job, had your work hours reduced, battled a disabling disease or faced a crippling accident. Expenses need to be met and there cannot be any excuses. Borrowing money is therefore the only way out. Loans come in all forms and sizes, be it credit cards, mortgages or payday loans, along with interest rates and financing fees. It’s not an uncommon phenomenon that such debts tend to spin out of control during periods of financial hardship.
You may not be able to make the minimum monthly payments on certain loans which would eventually become delinquent. Most organizations and institutions don’t prefer to bear the cost of pushing debtors into paying off their debt. Instead, these debts are sold to collection agencies specializing in coaxing money out of debtors in lieu of debts they defaulted on.
Most of the horror stories you hear about collection agencies and how they harass and morally degrade people into paying up are true. The actual fact is that the average consumer’s encounter with debt collectors turns into a nightmarish ordeal simply because most consumers are ignorant of their federal rights (the FDCPA) and state laws. Here is a list of things you should be aware of when a debt collector calls and you will be on your way to a debt free life in no time at all.
Collectors cannot contact you at work if you ask them not to
The Fair Debt Collection Practices Act clearly states that debt collectors cannot contact you at work if you explicitly forbid them from doing so. According to the FDCPA, calling at your place of employment to collect a debt is prohibited, especially if your employer deems it unacceptable.
The FTC compiled all the data and complaints they had from consumers about unlawful collection practices and presented it to the Congress. The report mentions that the number of complaints against collectors calling at work has gone up by 33%. The FTC advices that they take very serious actions based on consumer complaints and collectors stand to lose their job as well as their professional license.
Paying off debts in collection won’t benefit your credit score
When a debt or a delinquent account is reported by collectors or creditors to the credit reporting agencies, the accounts stay on record for a period of 7 years. Collectors might try to convince you that paying off the debt will have an immediate positive impact on your credit score but that’s just twisting facts. Even with a Paid in Full letter from a collector, an account in collections still counts as a negative strike.
The only reason for paying off accounts in collection is to either prevent collectors from harassing you or in extreme cases, sue you. A judgement on your credit report will ding your score severely. You might also want to get rid of old delinquent accounts simply because some lenders won’t approve a new line of credit in case there are unpaid or delinquent accounts appearing on your credit report.
Collectors make baseless threats to scare you into paying up
Collectors often resort to being overtly rude while dealing with debtors. They may threaten you with legal consequences in case you refuse to divulge your card number or your bank account number. Threats may range from being marked as ‘Refused to Pay’ right to the more creative ones like “you will be charged with check fraud/internet fraud” or ‘the sheriff will be coming over at noon to arrest you’.
Failure or inability to repay a debt is not a criminal offence. It’s a civil offence and you can only be tried in a civil court. Moreover, since it’s a civil charge, you cannot be arrested or accused of committing criminal acts such as check fraud. Taking everything into consideration, the FDCPA rules that threatening a debtor or using abusive language in the course of collecting a debt is strictly prohibited. You can file complaints with the FTC if a collector threatens you with such false charges or claims.
Collectors cannot talk about your debt with third parties
Contacting friends, neighbors and family members and informing them of your debt is not permissible under the provisions of the FDCPA. The rules laid down by Section 1692c(b) of the FDCPA states that a collector is only allowed to discuss your debt with you, a cosigner, your attorney or your spouse. They can only contact co-workers or relatives in order to locate you. Contacting any party who is in no way obligated to pay the debt is against the law.
The landmark case of Foti vs. NCO Financial Systems also established that debt collectors are also not allowed to leave voice messages (directly referring to the debt) on answering machines or any kind of open access voice mailbox. Consumer’s rights attorneys advice debtors to inform the FTC in case collectors contact third parties unnecessarily. Even attorneys specializing in consumers rights are equipped to handle such cases.
Collectors are not allowed to collect debts belonging to dead relatives
You are not legally liable to pay off debts belonging to deceased relatives unless you were a cosigner or in any way accountable for the incurred debt. Generally, creditors and collectors are paid out of the estate of the deceased. In case the deceased has nothing considerable to be considered as an estate, the collectors might be out of luck.
There is an exception to the case of debts belonging to the deceased. You can be held financially responsible for paying off your deceased spouse’s debts, especially if you reside in a community property state.
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