Due to unemployment, medical bills, small business closures and other factors, many Americans aren’t able to pay their bills on time during this pandemic, perhaps for the first time in their lives. Within weeks or months, those bills may be turned over to either in-house or outside collection agencies and it is important for consumers to understand their rights when it comes to collections.
Because debt collectors have had a history of harassing debtors, the Fair Debt Collection Practices Act (FDCPA), was passed in September of 1977.1
This act regulates the actions and behaviors of third-party debt collectors, outlining specific practices that are not allowed by debt collectors.2 It is important to understand that not all debt collectors are covered by this act. There are two types of debt collectors. The first is an in-house collector. Many companies will first try to collect a debt that is only a few weeks or months delinquent using their own personnel. These in-house debt collectors are not subject to the FDCPA.3 If they can’t collect on the debt in-house, companies often hire collection agencies to collect debts on their behalf. These collection agencies ARE subject to the FDCPA.
Most in-house debt collectors will begin with a reminder by mail or through a phone call. It is best to work with the creditor early on to establish a payment plan if you are able to pay a portion of the amount due. If a debt is 30 to 60 days past due, your lack of payment can be reported to any or all of the three major credit bureaus and this can harm your ability to secure a loan, open a credit card, rent a home or apartment, or even secure employment for up to seven years.4
Once a debt is turned over to a collection agency, employees of that agency must abide by the rules of the FDCPA. If you are contacted by a collection agency, never provide personal or financial information. Always contact the company where you incurred the debt and verify that they have turned your account over to a collection agency and have them disclose the name of the agency. Scams are common in debt collections so you should never pay a collection agency until you have verified that they legitimately are authorized to collect on the debt.
The FDCPA regulations are extensive but the following are answers to some of the most common questions regarding what debt collectors are and are not allowed to do.
• Debt collectors can only call between 8:00 a.m. and 9:00 p.m. They can’t call you in rapid succession. If you tell the collector not to call you again and follow up with a written letter stating such, they are legally not allowed to call you, but they can continue using other means, such as the mail, to collect the debt. They are not allowed to threaten you or use obscene language.
• Debt collectors can’t contact your employer or family and friends about your debt or in any way publicly shame you about the debt. They can only talk with you, your spouse or your attorney about your debt.
• Debt collectors can’t threaten that you will be put in jail or that they will make your debt situation public. They also can’t garnish your wages or take your personal property in lieu of the debt unless they sue you and obtain a court judgement to do so.
• Debt collectors must be honest about who employs them. They can’t, for example, say they work for the police or a government agency if they are not employed in that manner.
• Debt collectors can’t charge you additional fees, penalties or interest that was not in the original contract you entered into with the creditor.
If a debt collector breaks any of the FDCPA rules, you can report them to your state Attorney General and the Federal Trade Commission. Be sure to keep evidence of each incident so you have a record to provide to the authorities.
In response to the hardships of the COVID-19 pandemic additional consumer protections have been put in place. More information on these protections can be found online at the National Consumers Law Center website.5
If you are faced with harassment due to ongoing, overwhelming debt, personal bankruptcy may be an option. The bankruptcy attorneys at Hines Law have been helping residents throughout Massachusetts with debt relief options and protection so that they can find the right solution to their financial situation. We specialize in Chapter 7 and Chapter 13 filings and can help you get control of your finances and secure a bright financial future. Call us today for a Free case evaluation!
1 Fair Debt Collection Practices Act
2 What Debt Collectors Can and Cannot Do by Angie Mohr, www.investopedia.com, 3/15/2012
3 5 Things Debt Collectors Are Forbidden to Do by Amy Fontinelle, www.investopedia.com, 2/8/2020
4 Debt Collection: Know Your Rights by Jean Folger, www.investopedia.com, 5/26/2020
5 Major Consumer Protections Announced in Response to COVID-19, National Consumer Law Center, 5/20/2020