What to do when debt collectors pursue you
Debt collection can be an unpleasant business, but it's a big one.
The industry generates $12.2 billion in revenue for the roughly 4,500 firms chasing down borrowers who owe money on credit cards, auto loans and other accounts, according to figures from the Consumer Financial Protection Bureau.
Laws on the books and recent initiatives by the CFPB, a federal government consumer watchdog agency, offer borrowers ways to push back when firms call them multiple times a day or continue collection efforts without verifying that the debt is owed, among other illegal tactics.
Last week, the CFPB expanded its consumer complaint system to include gripes over debt collection related to any consumer debt, including auto loans, medical bills and student loans. The collection firms are required to respond to such complaints within 15 days.
Here are six tips for dealing with debt collection firms:
• Understand your rights
Debt collection agencies typically buy accounts that have gone unpaid from credit card issuers and other lenders for pennies on the dollar. Recovering even a small portion of what's owed on an account can be profitable. That's one reason firms have an incentive to go after borrowers over debt that's several years past due.
How they go about doing so, however, is restricted by the Fair Debt Collection Practices Act, Consumer Financial Protection Act and other laws.
The laws don't resolve the underlying issue of whether a consumer owes a debt. They just address the proper conduct from collection firms.
“So many consumers are intimidated about the process and don't know their rights and don't know what to do,” says Laura Udis, senior financial services advocate at the Consumer Federation of America, a research, education and advocacy organization.
For a broad list of debt collection agency no-nos, go to www.Consumer.ftc.gov/articles/0149-debt-collection.
• File a complaint
Borrowers who believe they're being mistreated have several avenues to complain, including the Federal Trade Commission and their state's attorney general's office. Many states have their own debt collection laws that may differ from federal laws.
Another option is to complain directly to the debt collection company.
The law enables borrowers to ask a debt collector to cease contacting them. The FTC recommends sending the request via certified mail. Once the firm receives the letter, its representatives may only contact you again to inform you of a specific action being taken against you, like a lawsuit.
• Don't ignore the situation
Many borrowers often make matters worse by ignoring overdue payment notices or collection agency letters.
There is a window of time after the initial collection notice during which borrowers can exercise certain rights, such as asking for the name and address of the original creditor, as well as proof that they owe money.
To do so, borrowers must make the request in writing within 30 days of receiving the collection notice.
• Heed statute of limitations
Unpaid loans may end up being bought and sold several times over the years by debt collectors. That can lead to collection attempts on accounts that have gone unpaid for many years.
When the statute of limitation expires on debts, collection agencies are no longer able to sue the borrower for payment. That doesn't stop collectors from trying to convince a borrower to pay up.
Setting aside the moral issue of meeting one's financial obligations, if the statute of limitations has expired on a debt, the borrower is, legally speaking, free to ignore the collection agency. But the claim can remain on your credit report after the statute of limitations for collecting the debt has expired. Such statutes vary from three to 15 years, depending on the state. Negative items remain on a credit report seven years; 10 years, if it's a bankruptcy.
Statutes of limitations don't apply to child support payments, federal and state taxes, and federally guaranteed student loans.
• Avoid debt-settlement programs
Experts advise against entering a debt-settlement program.
They are often run by for-profit companies that offer to negotiate a one-time payment that creditors can accept as a payoff in lieu of the total amount owed.
Some of those companies may suggest that borrowers stop paying creditors until they have accumulated enough money to make a settlement offer. That can lead to more interest and fees being tacked onto the bill — more money the borrower will have to pay should the creditor decline a settlement.
• Get qualified help
A nonprofit credit counseling organization can connect you with an expert who can help assess your financial situation and develop a plan to manage your debt, as well as offer advice on how to best to deal with specific debt collection issues.
Keep in mind that credit counselors will typically charge a fee for their services.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Bird flu ravaging commercial flocks remains mysterious
- Finding funding can be hard for ‘social enterprises’
- What Nasdaq’s record territory means for 401(k)s
- U.S. offshore wind energy slow to start
- Wolf looks at health insurance exchange for Pennsylvania
- Hamburger U schools bosses in McDonald’s
- Low-brow reigns in China’s film boom
- Analysts: Tech boom is no dot-com bubble
- The CEO of U.S. Steel says more jobs likely will be cut
- Small businesses still in recession
- Buffett fires back at unusual criticism as he marks 50 years at helm of Berkshire Hathaway