Collection Agencies and Your Rights

Receiving a phone call from a collection agency can be a terrifying experience. Many people are faced with demands of payment, bad credit citations, harassing phone calls, and even threats of legal action. While some collection agency acts are justified, federal law puts limits on how far their pursuits can go.

Who Makes the Rules?

Before delving into collection agency practices, it is important to understand the entities and laws that regulate them. The Federal Trade Commission (FTC) is a federal agency that works to protect consumers from unfair business practices. With regard to collection agencies, the FTC enforces the Fair Debt Collection Practices Act (FDCPA), which prevents collection agencies from contacting you in inappropriate and deceptive ways. The FDCPA protects all consumers with debt related to charged off and collections accounts being collected by third-party debt collectors and collection agencies.

What Are the Rules?

When it comes to collection agencies, the FDCPA’s list of off-limits practices are broad. Collection agencies cannot:

  • Harass or abuse you or third parties connected to you. Examples include:
    • Threats of violence or bodily harm
    • Threats of making bad credit worse
    • Public disclosure of your debts
    • Using obscene language
    • Calling repeatedly or during inconvenient hours (i.e., between 9:00 pm and 8:00 am)
  • Lie in attempt to collect debt. Examples include:
    • Claiming to hold a law enforcement or other government position
    • Claiming to be an attorney unless they actually are (as with a collections law firm)
    • Using a false name
    • Telling you that you have committed a crime
    • Claiming to represent a credit bureau
    • Inflating the amount you owe
    • Falsely citing documents as legal forms
  • Threaten legal action for failure to pay your debt, such as:
    • An arrest
    • Seizing or garnishing your wages
    • Seizing and selling your property
    • Future lawsuits that they do not intend to file
  • Use unfair practices against you, including:
    • Attempting to collect fees or interest in addition to the amount you owe (unless permitted by state law or the agreement you signed)
    • Depositing a post-dated check
    • Reporting false information to the credit bureaus in attempt to promote bad credit

How to Exercise Your Rights

While the FDCPA’s guidelines are strict, a collection agency’s willingness to follow them is a different story. Many consumers are forced to deal with agencies that don’t play by the rules. When this occurs, exercise your rights by using the following options:

  • If a collection agency is calling repeatedly, write a letter informing them that they cannot contact you again unless they are taking a specific action, such as filing a lawsuit against you. Request a return receipt to ensure proof that they received the letter. While this action will not erase your debt, it may eliminate harassing phone calls.
  • Request formal validation regarding your debt, in which the collection agency must prove that you owe them money. The validation must include:
    • The amount you currently owe
    • A complete payment history
    • Additional calculations such as fees, interest, and penalties
    • A copy of the original agreement or application between yourself and your creditor
    • Proof that the debt collector does in fact now own the debt
    • Substantiation that they are bonded to collect debts within your current state of residence

    Note: If the collection agency cannot validate your debt, they must stop pursuing you.

  • Contact an attorney to represent you. If you are feeling overwhelmed, an experienced attorney may be the advocate you need. What’s more, the FDCPA prohibits collection agencies from contacting you directly if you have hired representation.

Peace of mind is difficult to achieve with a collection agency at your door, but there are ways to combat harassment and other unfair practices. Get acquainted with your rights and consider asking a lawyer who specializes in repairing bad credit for help.