Debt Collection Guide

How to Protect Your Rights When the Bills Start Rolling in and Phone Calls from Collection Agencies Start

Falling behind on bills is a common – yet highly concerning – issue that occurs among consumers. This type of situation has the ability to escalate into a situation that brings an immense level of stress, anxiety, and less than favorable run-ins with collection agencies. It does not matter what type of debt it is – credit, medical, vehicle loans, or other types of bills. Each year- in the United States alone – millions of consumers – answer to collection agencies. If you have any type of debt, it is advised that you learn how the collection process works and that you are aware of your legal rights. In doing so, you will be able to navigate the situation with a high level of confidence and you will be able to protect your financial-based future.

In this guide, you will be introduced to the debt-based practices within the United States, the laws set forth by the federal government in regards to debt collections, and what steps that you should take when you are contacted. Furthermore, resolution strategies, and additional considerations such as the impact to your credit score and professional services that are offered. There are many laws and regulations that aid in providing consumer protections, but the circumstances do vary significantly. If you need assistance, it is advised that you consult with an attorney or a credit counselor so that advice may be obtained that is personal to your situation.

How Does Debt Collection Work?

When you fall behind on your payments associated with your debt or debts, the creditor that you originally owed initiates the first of the collection efforts. These initial collections are referred to as “first-party” collections and are not – in any manner – covered by the federal-based collection laws or the Act known as the Fair Debt Collection Practices (FDCPA), or the Federal Reserve.

If the initial collection attempt is unsuccessful, the creditor that is owed will then go through the process of selling the debt to a third-party agency for collections, or to a buyer that purchases outstanding debts. It is at this time that the FDCPA will start the implementation of their regulation, and the Consumer Financial Protection Bureau (CFPB) will start moving on their end through Regulation F. The rules and regulations are over debt buyers, debt collectors, and in some cases, attorneys that specialize in collecting debts for personal, household, and/or family purposes. Examples of these include credit cards, student loans, other types of loans, and medical bills. These may also include vehicle loans and mortgages.

Debt collectors will initially attempt to contact consumers with phone calls and even letters. It is not uncommon – in today’s world – for collectors to reach out with text messages, emails, and on social media platforms. The outstanding debt will typically show up on credit reports and will result in damage to the overall score. In turn, this will negatively impact the consumer’s ability to borrow money, obtaining insurance, and even prevent employment, in some instances.

Validation information will be included. It will provide specific details in regards to the debt, the amount of money that is owed towards the debt, the name of the original creditor, and the rights available to consumers for a dispute. You have some basic core rights under the FDCPA, as well as Regulation F.

The FDCPA was officially enacted in the year of 1977and in 2021, it was updated and in effect under Regulation F. In short, this prohibits consumers from being subjected to abusive, deceptive, or unfair practices by those attempting to collect a debt. It aids in providing clear and specific boundaries in terms of communications and actions taken to obtain monies owed.

The Restrictions on Communication

There are several restrictions imposed on communications from debt collectors. The following outlines the most common:

• Generally, collectors cannot initiate calls until 8am or later each day.
• Collectors must end the calls by 9pm or any time that is considered to be “inconvenient” in your area.
• If your employer does not allow or prohibits personal calls, they may not call you at your workplace.
• If a debt collector calls more than 7 times within a 7consecutive day period, they are presumed to be harassing you.
• If you send a written request or a “cease and desist” letter, they must stop communications. In most instances, these may include a limited exception, such as contacting in regards of legal notices.
• If an electronic communication is sent – such as a text or an email – it should include a mechanism that clearly states that you may opt out.

In addition to rules and regulations, there are a number of prohibited conduct regulations. These are as follows:

• Debt collectors should not engage in any type of harassment or abuse. Examples include threats of violence, using language that is obscene, repeating calls simply to annoy you, and/or public shaming in any type of environment – including online environments such as social media platforms.
• They should not use statements that are false or misleading. The debt amount should not be lied about, they should not pretend to be a lawyer or a government official, they should not threaten lawsuits or arrest, and should not threaten to garnish benefits that are protected under federal law.
• They should never attempt to collect more than they are owed without given the proper and legal authorization.
• They must not deposit checks that are post-dated early.
• They should not contact family members or neighbors more than once. That one time is to locate you. They must not disclose the debt when speaking to someone for the purpose and intent of finding you.
• No debt collector is allowed to speak to any third party about your debt.

Debt Validation and Debt Dispute

Within a period of 5 days, a debt collector must send a communication outlined as a “Validation Information” form. This should include the amount of the debt, the name of the original creditor, and an outline of the fact that you have the right to 30 days to dispute the validity of the debt.

If you do decide to dispute the debt, the collector must then stop all collection activities until they provide you with verification of the debt. This could include proof of the debt, account statements, and/or a judgment against you from the original creditor.

If debts are actually past the statute of limitations, collectors must then state that they cannot legally sue you for the debt. While it is true that some debts could result in wage garnishment, it is also true to note that certain types of incomes such as Social Security, VA Benefits, and other types of benefits from the government are completely protected from these garnishments. The laws of the state where you reside may offer you – the consumer – additional types of protections. You should review updates on a periodic basis, and enforcement actions that may be legally taken against you.

When a Debt Collector Calls

Receiving a call from a debt collector may be very challenging. You should simply stay calm. You should make a point to document as much information as possible – this includes the date and time of the call, the name and/or ID of the person that you speak to, and the details associated with the conversation.

Once you have the conversation, you send a dispute letter that is written by certified mail with a return receipt. This should be sent within 30 days and it should request verification. This places the burden on the debt collector to prove that the debt is, in fact, yours and that it is completely accurate. You may use one of many templates available online or through the CFPB.

If you so desire, you may send a cease and a desist if you want to. This is if you want no further contact from the debt collector. The letter should state that they should completely stop contacting you except for that which is absolutely required by law. This is an effective means of stopping undue and frustrating contact. Once you send this, it must be honored.

When it comes to debts, you may negotiate or even settle. Get a settlement agreement in writing before starting payments. You may want to look into “pay for delete” requests when settling debts.

If the debt is legitimately yours, you should not ignore it. Doing so could result in being sued, having a judgment placed against you, and/or even garnishment on your wages where this type of procedure is allowed.

If you are experiencing significant financial hardship, you may consider the following:

• Debt Settlement Programs
• Credit Counseling
• Bankruptcy – either Chapter 7 or Chapter 13
• Medical debt may have evolving rules

Conclusion

Debt collection is a daunting experience. There are federal laws, though, that provide you with certain safeguards against abuse and harassment. If you would like to learn more, contact us here at Somerville Bank today by visiting one of our many locations: https://somervillebank.net/locations/