Debt Collection Laws | Fair Debt Collection Act: What You Need To Know

Americans are no strangers to debt and debt collection. Roughly 77 million people in the U.S. are struggling under mountains of debt and victims of harassment by collection agencies.

Many people do not realize that as an American you have rights when it comes to debt and debt collection.

What is the Fair Debt Collection Act and Why Do We Need it?

The Fair Debt Collection Practices Act (FDCPA) is a federal law that protects American citizens by controlling the allowable actions of debt collectors and agencies. The law is particular about what time of day collection agencies can call you, how often they call, how they go about collecting money and things they can and cannot say to you.

Debt collectors cannot use deception, abusive or unfair methods to collect money from you. Cases, where debt collection agencies were threatening and abusive to customers, is why the government enacted the law in the first place.

The FDCPA only protects against third-party collection agencies, not someone to whom you owe a personal debt. For example, if you owe a local store some money, they are not subject to the FDCPA laws governing how they can collect that debt from you. The FDCPA also does not cover business debts.

The FDCPA does cover the following types of debts:

  • Mortgages
  • Credit cards
  • Medical debts
  • Personal, family, or household debts.

There are two types of collection agencies, in-house, and third-party debt collectors.

  • There are about 4,900 third-party debt collection agencies in the country.
  • 130,000 people work for debt collection agencies.
  • Debt collection companies earn $10.9 billion a year.
  • Third-party agencies collect about $78.5 billion of debt.
  • Debt collectors call on about 35% of Americans daily.
  • 47% of debt is for medical expenses.
  • Student loans account for 21% of all debts.
  • Credit card debts are only about 10% of the total owed.

In-House Debt Collection

Many big companies have their own in-house debt collection departments. They hire designated employees to collect all monies owed to them by phone and in writing. These types of debt collectors are not subject to the FDCPA laws. If in-house collectors are unsuccessful, after a six-month period they can outsource the debts to third-party agencies.

Although not subject to FDCPA laws, each state has its own acceptable methods for debt collection and in-house department must follow those.

Third-Party Debt Collection Agencies

Third-party debt collection agencies are privately owned organizations that specialize in collecting debts for other companies. They are subject to the laws of FDCPA.

Third-party agencies were fined $79 million in 2015 for unlawful debt collection practices and had to return $360 million to victims of their abuse.

What Debt Collectors Can Do

Debt collection agencies can notify you of a debt and request payment. They are also authorized to work out payment plans and details until total repayment.

Debt collectors can report your debt information to credit reporting companies. However, the Fair Credit Reporting Act dictates how they can report your debt.

When first contacting you they must notify you the name of your creditor, the amount you owe, that you have the right to dispute the debt and that you can request contact information for the original creditor.

Creditors and debt collectors also have the right to sue you, and they can contact you with information regarding court dates and notification of the lawsuit.

What Debt Collectors Can't-Do

Debt collectors are subject to strict rules about when or where they can contact you. They may not contact you at an “unusual place or time”. They cannot call you before 8 a.m. or after 9 p.m. If you have informed the debt collector they may not call you at work, then they are disallowed from doing so.

They cannot harass you or members of your family. Harassment applies to phone contact or any other type of communication. Debt collectors cannot use offensive or profane language or call too frequently.

If the debt collector is aware that you have an attorney representing you, then they must stop all communication with you and contact the lawyer instead.

If you state in writing that you do not want the debt collector to contact you, they must stop immediately.

If you dispute the debt within 30 days of their initial call, the debt collector cannot continue to contact you or collect the debt until you have valid information from the creditor about the money owed.

The debt collection agency cannot lie, harass, abuse you, threaten violence or arrest and they cannot talk about your debt with anyone but you and your spouse. Debt collectors do not have the authority to garnish your wages and cannot threaten to do so. They also cannot collect more than you owe or threatened to take your property.

How and Can Debt Collectors Contact You

Debt collectors do have the right to contact you in writing or by phone. They can contact you after 8 a.m. and before 9 p.m. If you send them a cease-and-desist letter, then they must stop all contact.

If you have a lawyer, debt collectors can contact your lawyer to work out repayment details.

Under no circumstances may a collection agency come to your home to try and get to you pay the debt in person.

How to File a Complaint Against a Debt Collector

Even with the laws in place, some agencies and employees overstep boundaries and push harder than they are allowed to when collecting debts. If you feel that you have been harassed, or abused and your FDCPA laws were violated, you can file a complaint against the debt collector.

  1. Contact your State Attorney General’s Office - www.naag.org
  2. Contact the Federal Trade Commission - www.ftccomplaintassistant.gov
  3. Contact the Consumer Financial Protection Bureau - www.consumerfinance.gov/complaint/

If you are still unsatisfied, you also have the legal right to file a suit against the debt collector.