Laws for Credit Collectors

In mainstream society, debt collectors are about as popular as IRS auditors. When a debt collector calls, few consumers opt to answer the phone, feeling much more inclined to let the call go to voicemail. Over the years, the Federal Trade Commission in tandem with the Fair Debt Collection and Practices Act force these less than popular entities to abide by a list of hefty do’s and don’ts.

What a Debt Collector Can Do

A debt collector has every right under the letter of the law to pursue you for a debt that you legitimately owe. They do this by calling you and sending you letters in an attempt to collect that debt. After all, not paying your financial obligations is akin to theft. Debt collectors are allowed to report your negative payment history to credit reporting agencies, negatively affecting your buying power for several years. However, this is where the list of “can do’s” abruptly end and where the list of “can’t do’s” begin.

Statute of Limitations

When you sign a credit agreement and don’t hold up to your end of the bargain, the standard practice for most creditors is to ship that debt to an in house collection agency and eventually sell it to a third party collection agency. These agencies can follow a debtor by mail and by phone for as long as the state’s statute of limitations on debt collection dictates. This ranges from a few years for up to ten years. However, regardless of the statute of limitations, this has no bearing on a credit report, which can maintain a negative payment record for up to seven years.

Prohibited Practices

According to the FTC website, debt collectors are prohibited from engaging in harassment, making false statements, issuing threats and contacting friends, family members or employers about your debt. Engaging in any of these practices opens up the debt collection agency to lawsuit and fines imposed by the Federal Trade Commission. It is the debt collector’s responsibility to maintain your privacy regarding your account, and to include disclosures on the bottom of any correspondence stating that the purpose of that correspondence is to collect a debt.

Court Action

Depending on state law, the debt collection agency can opt to sue a consumer for wage garnishment or a judgment resulting in liens on personal property. However, the consumer is eligible to defend his position and dispute the debt. Unless the debt collector can show irrefutable proof that the debt belongs to the consumer, a judgment or wage garnishment is unlikely.

Additional information is available at the FTC website, as well as information on fighting debt collector harassment. Whether it is your debt or if your identity has been stolen, this is valuable information that helps you navigate the murky waters of debt management, stopping creditor harassment in its tracks.