Dealing with Debt Collectors: What Are Your Rights?

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If you’re struggling with debt and suddenly find yourself fielding calls from collection agencies, it’s important to know that you’re not powerless in this situation — even if it may feel that way sometimes. There are rules regulating what debt collectors can say and do in trying to get your payment. The Fair Debt Collection Practices Act is a federal law that makes it illegal for collectors to use abusive, unfair or deceptive practices to collect from you.

Knowing your rights under this act will help you take control of the situation and avoid potential abuses and scams.

What collectors can and cannot do

If you’re unable to pay a debt, a collection agency can sue you to collect what you owe. If they win, the court will issue a judgment against you for the amount of money you owe. The agency can then garnish your bank account and your wages. However, the collector can’t garnish your Social Security, Supplemental Security Income, veterans, disability or other similar federal benefits.

Federal law also places the following restrictions on debt collectors:

• They can’t harass you, use threats of violence, threaten to publish the names of people who won’t pay their debts, use obscene language or make repeated phone calls to you.
• They can’t falsely claim that they’re attorneys or government representatives or that you’ve committed a crime, among other things.
• They can’t misrepresent the amount you owe. They can’t use unfair practices to collect any interest, fees or other charges on top of what you already owe unless those conditions were already in place when your debt was created or state law allows it.
• They can’t contact you by postcard.
• They can’t use a false company name, send you anything that mimics an official court or government document or give out false credit information about you.

How to communicate with debt collectors

If a debt collector calls you, The Federal Trade Commission (FTC), which enforces the debt collection laws, recommends that you consider speaking to them at least once, even if you can’t pay the debt right away or you think the debt doesn’t belong to you.

After a debt collector contacts you the first time, they’re required to send you a written validation notice that discloses the name of the creditor to whom you are in debt and what protocol you should follow if you don’t think you owe the money. Furthermore, the debt collector must provide this information within five days of your initial communication.

If the collector keeps calling you, you can ask them to stop by sending them a letter in which you specify a time or method to contact you. For example, you can ask that they not call you at home or work but instead contact you only by regular mail. The Consumer Financial Protection Bureau (CFPB) has sample letters you can use to help draft your own, with templates for different circumstances, such as stopping the debt collector from future contact altogether and specifying under what terms the debt collector can contact you.

You should respond to collectors in writing as quickly as possible because you have only 30 days after you are first contacted to request certain information. For example, if you don’t think you actually owe the debt, you can write the collector a letter explaining the situation, but it must be sent within 30 days of receiving your validation notice.

Once the debt collector has received your letter explaining how to contact you, they can only initiate contact to tell you there will be no future contact or to inform you that they plan to take future action, such as filing a lawsuit.

If you’ve disputed the debt within the appropriate time frame, the debt collector can only resume contacting you after your dispute has been investigated and the collector has verified the debt to you in writing.

While your letter can stop a debt collector from calling you, it will not absolve you of the debt (assuming you actually owe it), and the debt collector or creditor could still sue you in order to collect the money you owe. Also, ending communication with a debt collector will not stop the collection from being reported to the three nationwide credit reporting agencies and appearing on your credit reports.

Spotting collection scams

If you’re contacted by a debt collector about a debt you’ve never heard of before, it could be a scam. The CFPB warns about the following signs of possible debt collection scams:

• The collector threatens you. Legitimate collectors know that it’s illegal to threaten you (see above), so they usually won’t.
• The collector won’t give you details about the debt. Ask for an explanation of the debt in writing before you pay, including when the debt was incurred.
• The collector won’t provide a mailing address or phone number for you to contact them later.
• The collector asks you for personal information. Never give out your Social Security number, financial details or other personal information over the phone unless you’re sure the individual you’re talking to is legitimate.

When talking to a suspected scammer, ask for the company name, street address, phone number and professional license number, as collectors must be licensed in many states. If they can’t provide these details or you’re unable to verify the information they do give you, don’t pay them any money.

What should you do if you think a collector is breaking the law?

If you suspect the collector is a scammer, is violating the law or continues contacting you after receiving your written notice, you should file a report with the FTC, the CFPB and your state attorney general’s office.

Having a debt in collections can cause long-term damage to your credit scores, so it’s best to avoid this situation by staying on top of your payments, whenever possible. However, if you do find yourself dealing with debt collectors, it’s vital that you know your rights.