Debt Collection Laws

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Debt Collection Laws and Creditor Harassment

Credit card companies, lenders, and other creditors cannot:

• Call you early in the morning or late at night
• Call you at your job if you tell the debt collector you can't get collection phone calls at work
• Make direct contact with you if you tell them you have an attorney
• Contact other people about your debt or bother your family
• Contact you after you tell them in writing to stop
• Harass you, your friends, or your family

Note: The fact that a creditor can't make direct contact with you if you have an attorney is one of many excellent reasons to get one. An attorney can also help you understand your rights. You may be able to negotiate a settlement or a payment plan with a creditor.

The Fair Debt Collection Practices Act Protects You

The federal Fair Debt Collection Practices Act(FDCPA) is a consumer protection law that gives you these rights and protections against creditors. It also protects your spouse, parents (if you are a minor), legal guardian, executor, or administrator.

The FDCPA details how creditors can communicate with you and who the law protects. Read on for specifics about each section of the Act.

How Creditors May Contact You

Any communication between you and the creditor is controlled under federal law.

A debt collector or creditor can only contact you at a "usual time." The law defines this as after 8 a.m. and before 9 p.m. in your time zone. They can only contact you at unusual times or places if you have given permission or a judge approves it. A creditor cannot inconvenience you and should try to contact you at standard times and places.

A collection agent can call your work or call your work phone unless your employer prohibits these calls. You need to work with your attorney or tell the collection company that they cannot contact you at work.

Creditors Talking to Your Attorney

Be sure to tell the debt collection person or agency that you have an attorney. You may need to provide the attorney's name and address. They may call your attorney to confirm that you have legal representation. They can also ask your attorney if they can make direct contact with you. Your attorney will say no unless you have discussed this option.

If your attorney fails to respond to the debt collection agency, they might contact you.

Creditors Talking to Family, Friends, or Third Parties

A debt collection agent cannot talk to your friends and family unless:

• There is an exception under the law in Section 1692b
• You permitted the debt collector
• A judge gives them permission
• If a judge rules it is a fair remedy, any reasonably necessary contact to collect the debt may be permitted

Creditors can talk to your attorney, consumer reporting agencies, other creditors, attorneys for their own company, or attorneys for individual debt collection agents. The majority of debt collection agencies have a team of attorneys.

What Can a Debt Collector Tell Friends and Family?

Information gathering about you is legal but limited to finding your location or how to contact you. You can report a collections agent if they do not stick to the following rules:

• Must identify themselves as a collections agent or give the name of the creditor
• Must explain they are confirming or correcting location information. This might sound something like "I wanted to check if this is still their cell phone number?" or "Do they still live at this address?" Verification of the debt is legal.

Note: They do not have to identify their collection agency or employer unless asked. By law, you do not need to answer any of their questions if they call you.

The debt collector is breaking the law if they:

• Say your friend or family member is in debt
• Contact you more than once, unless you ask them to call you back or they have a reasonable belief that you have new information
• Send you a postcard
• Mail you anything that shows they are a debt collector or are collecting debt from your friend or family member
• Contact you after they know your friend or family member has an attorney

These laws keep debt private from friends, family members, and most third parties. If a law is broken, you should tell your attorney right away.

Asking Creditors Not To Talk to You

You can ask a debt collection agency to cease communication by written notice. You can also write to tell them you refuse to pay the debt. Once the collection agency receives your request, they cannot contact you except to:

• Respond to say they won't contact you again
• Say they are no longer trying to collect on your debt
• Offer special remedies to resolve your debt, such as offering to dismiss some of the debt if you pay a lump sum
• Warn you that they intend to use special collection actions for your debt

These responses can come by mail, but the envelope must not indicate that it is about debt or debt collection efforts. It cannot be a postcard or telegram that shows you are in debt.

What Type of Behavior Does the FDCPA Bar a Debt Collector From Engaging In?

The FDCPA prohibits debt collection agencies from using abusive, deceptive, or unfair tactics. Debt collectors may not engage in:

• Harassing Behavior: A debt collector may not use profanity, threats of violence, or make repeated calls to the debtor to annoy
• Using False, Deceptive, or Misleading Statements: A debt collector may not lie about the amount of the debt, claim to work for a credit reporting company, or claim to be an attorney or government representative
• Threatening Behavior: Debt collectors may not threaten a debtor with arrest for not paying debts or threaten to garnish a debtor's wages or sell their property unless the law permits these actions
• Unfair Collection Practices: A collector may not add interest or fees that the original agreement disallows, contact a debtor by postcard, or deposit a posted-dated check early

If a debt collector engages in any of these practices, let your attorney know at once.

Are Debt Collection Agencies Allowed To Add Interest to the Original Debt?

The FDCPA does not prohibit adding interest to the original debt if:

• The original agreement allows a debt collector to add interest during the debt collection process
• State law allows it

State law determines the maximum interest a collector may charge.

Am I Required To Wire a Late Payment Through Western Union?

No. Some collectors insist on receiving a delinquent payment through a wire transfer, overnight, or express mail service.

Neither federal nor state law requires you to pay late through any of these services. It is acceptable to mail the payment or to use a debit card or checking account to make the payment.

Can Debt Collection Agencies Garnish My Wages or My Bank Account?

Yes. If the debt collector receives a court judgment after filing a lawsuit against you for nonpayment, the collector can collect the debt by:

• Wage garnishment of up to 25% of your net wages
• Taking the funds from your bank account
• Recording a lien against your real property

In many states, even if you have no assets at the time of the judgment, the collector can continue to try to collect the debt for up to 20 years.

Should You File for Bankruptcy?

Bankruptcy is a legal action to discharge your debts. Once the bankruptcy is filed, an automatic stay ensues. An automatic stay requires all legal actions, such as lawsuits to collect, foreclosure proceedings, and repossession actions, to cease. Creditors must also stop all telephone calls.

A bankruptcy will only discharge certain types of debt. Bankruptcy discharges unsecured consumer debts like credit cards, medical, and utility bills. In most cases, bankruptcy doesn't discharge student loans, tax debt, alimony, child support obligations, criminal fines, and personal liability for personal injury awards.

There are two main bankruptcy options for individuals: Chapter 13 and Chapter 7. Chapter 13 bankruptcy reorganizes your debt. It is a payment plan in which you pay a fixed monthly amount for three to five years. At the end of this plan, the bankruptcy court will discharge your remaining qualifying debts.

Chapter 7 Bankruptcy is a liquidation plan. A trustee will manage the sale of all non-exempt assets to pay towards your debts. The bankruptcy court discharges your remaining balance.

You must complete an approved credit counseling course before filing for bankruptcy. The U.S. Trustee website can help you find a nonprofit credit counseling agency.

Know When To Ask for Help: Call a Bankruptcy Lawyer

Many people find repaying debt challenging and draining. Debt counselors and debt reduction programs are available to help.

Talk with a bankruptcy attorney if you think bankruptcy may be the right alternative for you. Some offer free initial consultations or will charge a fee which is a deduction from your total fee if you decide to file. 

Filing for bankruptcy is a serious choice and is often a last resort. Bankruptcy can provide a fresh start in rebuilding your credit and regaining your financial health. One of the best ways to ensure a successful bankruptcy is to hire an experienced bankruptcy attorney.