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As of March 2020, consumer debt totaled a whopping $14.3 trillion in the United States, and around a third of all Americans had at least one debt in collections. They weren’t just struggling with paying off debts—the Consumer Financial Protection Bureau noted in 2019 that about one-fifth of the complaints it received were about debt collectors. This isn’t a surprise when you consider that there are approximately 7,800 collection agencies in the United States, and the third-party debt collection market is a $12.7 billion industry.
If you’re dealing with a debt in collections, learning about your rights and the options you may have can help you take positive action. And that can help increase the likelihood of a more favorable outcome for you. Find out more below.
The good news is that you’re not alone when you’re dealing with debt collectors. You actually have a lot of laws on your side. A number of federal acts specifically address debt collections, and government organizations are in place to help you protect your rights as a consumer.
The Fair Debt Collection Practices Act provides numerous provisions to protect consumers from unfair debt collection activity. Some of those provisions include:
The Fair Credit Reporting Act helps protect you from other types of abusive actions by debt collectors. Specifically, this law mandates fair and accurate credit reporting. If you find a potential error on your credit report, you can write to the bureau in question and ask them to investigate it. By law, they have to investigate, and if the reporting creditor or collection agency can’t prove those facts, the bureau has to delete or correct the information.
The FCRA also gives you the right to at least one free credit report per year from each credit reporting agency. Plus, you have the right to a copy of your credit report if it’s used to evaluate you for credit and you’re denied because of information in your credit file.
The Telephone Consumer Protection Act restricts how autodialers and other phone call tech can be used. Specifically, debt collectors and others can’t use autodialers—aka robocallers—to call your cell phone.
Unfair or Deceptive Acts or Practices refer generally to behaviors in financial and accounting sectors that aren’t legal or ethical. They’re prohibited by Section 5 of the Federal Trade Commission Act and regulated by a number of entities at the federal and state levels. What you need to know with regard to debt collectors is that anyone dealing with financial products must be transparent and honest about certain facts, such as how much you owe and how it was calculated.
As a federal law, the FDCPA is enforced in all states. Some states enforce it differently than others, and some have their own laws that add even more protections. States that have their own fair debt collection laws include California, Colorado, Florida, Georgia, Illinois and Washington.
Overall, the list of rights and protections set out by these laws is designed to make debt collection fairer for consumers. The laws seek to ensure you have:
Debt collection agencies are required to follow all the laws above. But just because the law is on your side when it comes to fairness and accuracy, it doesn’t mean you won’t ever deal with a debt that puts some stress on you. Understanding how debt collectors work can help you know what to expect and when someone might be crossing the line into illegality.
A debt can go to collections as soon as you default on it. The exact timeline depends on your contract with the lender and the lender’s policies.
The statute of limitations on debt is how long a creditor or collection agency can attempt to collect through legal means, including filing a lawsuit. The timeline varies by state and usually starts when you first default. In some cases, you can reset the statute of limitations by making payments on old debt, so this is something to be aware of when dealing with collectors.
Debt collection laws dictate when and how collectors can contact you. Debt collectors can’t call certain workplaces, and they can’t continue to call you at your workplace if you tell them to stop.
Debt collectors can also only call you between the hours of 8 a.m. and 9 p.m. in your time zone. They’re allowed to contact you via methods that include phone, email, fax or mail, and starting in fall 2021, debt collectors will also be allowed to contact you via text and social media.
It can be tempting to throw a collections bill in the trash or shove it into a drawer to deal with down the road. That’s even more tempting if you know you can’t pay the bill today. But ignoring the debt doesn’t make it go away and can lead to even more stress down the road.
Here are some steps to take if a debt collector contacts you:
Remember that collection situations can be complex and your situation is unique to you. If you’re not sure what the best action for you is, you may want to consult legal professionals.
Illegal or unethical debt collection practices are unfortunately more common than many realize. From January 1, 2020, through September 2020, for example, the FTC’s Consumer Sentinel Network received tens of thousands of reports from consumers about concerning collection practices—more than 85,000 reports, to be exact. And roughly 45 percent of those were from people who didn’t owe the money or who said they were targeted by threatening or abusive collector behavior.
The first step to recognizing whether you’re being targeted by illegal practices is knowing your rights. If your rights under any of the above laws are being infringed upon, someone might be doing something illegal. You can report those actions to various agencies—more on that below.
Before we get there, though, here are some red-flag behaviors to know about. These are all potential signs that something illegal is going on:
If a debt collector violates any of the debt collection laws discussed above, you can and should file a complaint. There are several agencies where you can file these types of complaints, and depending on the situation, you might even file a complaint with more than one.
You can report a debt collector to:
So, what happens if you owe the money and the collector follows all the laws? You may need to pay up. If you can’t pay the amount due immediately, you have a couple of options to consider.
A debt settlement occurs when you agree to pay a lesser amount and the collector agrees to consider the matter closed. Often, third-party debt collectors buy a debt for pennies on the dollar, so they can still make money even if you don’t pay the total amount due. That makes them more likely to settle for something over nothing.
Settling a debt means you don’t legally owe it anymore. But make sure you get the agreement in writing or the debt collector could try to come after you for the rest.
Paying off a debt—in full or via settlement—doesn’t necessarily improve your credit score, especially immediately. But it also doesn’t hurt your score, since the collection account is probably already on your report. And it may be better than a charge-off.
If you can’t pay the debt and are dealing with other financial issues, you might consider bankruptcy. Filing a bankruptcy petition puts an automatic stay in effect, so debt collectors can’t continue collection activity. However, bankruptcy can have serious consequences for your credit, so make sure to talk to an attorney first so you can make an educated decision.
You may be able to negotiate with the collection agency to make several smaller payments over time to pay off the debt. Again, make sure you get any agreement in writing to protect yourself.
Whether you’re dealing with collection activity on an account you don’t think you owe or you want to repair your credit after dealing with legitimate collection activity, Lexington Law may be able to help. Find out more about our credit repair services to see how we can help you dispute inaccurate information on your credit score and begin taking positive actions to potentially impact your credit score.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
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