If you’ve got so many debt collectors calling and demanding money that you’re afraid to answer your phone, relief isn’t as hard to find as you might think.
Once you understand how debt collection works, you can use that knowledge to find peace as you do the hard work of getting debt-free.
Here’s how to deal with debt collectors and the actions — legal and illegal — they may take to get your money.
Who Are Debt Collectors, and What Do They Do?
When most of us talk about debt collectors, we’re not talking about employees of the bank or credit card company that initially extended the credit or provided a loan.
Instead, we’re referring to people who work for a third-party company that regularly collects debts owed to other creditors. By the time a third-party debt collection agency gets involved, the bill is usually long past due.
Most financial institutions also have internal debt collectors who usually work with borrowers who have recently become past due. Their goal is to help you get current quickly.
If they fail, your debt is often moved to the third-party collectors. If that company also can’t get you to pay up, your debt can move on to a third kind of collection agency: debt buyers.
Debt buyers are companies that purchase debts and have their own in-house collectors. Many debt collection companies are also debt buyers.
5 Tips for Dealing With Debt Collectors
There are a number of people you could come into contact with when dealing with debt collectors, but a few golden rules remain true no matter who’s on the other end of the line.
Here are five things to remember that will keep you from being taken advantage of by debt collectors.
1. Know Your Rights
All three kinds of debt collectors — internal collectors, third-party collectors and debt buyers — must follow the set of rules laid out in the Fair Debt Collection Practices Act (FDCPA).
The FDCPA restricts the actions debt collectors can take toward consumers to collect on debts.
And while this act is federal law, it’s very common to see companies disregard it.
Take Expert Global Solutions, the world’s largest third-party debt collector, for example. The company was fined $3.2 million in 2013 after being accused of harassing debtors with illegal collections calls.
The FDCPA allows you to slow or stop those annoying calls. Not only that, but it lets you dictate how debt collectors communicate with you. You can request that they only email you or mail physical notices to you.
You can even stop communication altogether and cut all ties to your debt collector. However, you may not want to take things that far, according to Bruce McClary from the National Foundation for Credit Counseling.
“When you request to have communication completely cut off and you just want to drop off their radar, that sends them a signal that you have zero intention of paying ever, and it may accelerate some of their actions in trying to recover the debt in other ways,” McClary told Codetic.
The point is that you have options beyond simply dodging debt collectors until you can find the money to pay. Other protections provided by the FDCPA include:
- Debt collectors are required to provide proof that you owe the debt.
- They can’t call you before 8 a.m. or after 9 p.m.
- They can’t call you at work if you tell them it could put your job in jeopardy.
- While it’s legal for them to call a family member or friend to find you, a debt collector cannot give them details about your debt. And they can only call each family member or friend one time in most states.
If you are the victim of unfair debt collection practices, here are the resources you need to file a complaint:
The FDCPA does not, however, protect you from people collecting on personal debts. It only applies to third-party debt collectors.
|What to do||Where to go|
|File a complaint about a debt collector or creditor’s in-house collection agency.||U.S. Consumer Financial Protection Bureau, 855-411-2372 or the complaint form on the CFPB website.|
|File a complaint with your state consumer protection agency.||Find your state attorney general through the National Association of Attorneys General.|
|File a complaint with the Better Business Bureau.||BBB’s Online Complaint System|
|File a civil suit in your state or federal court.||Find a consumer lawyer in your city or state from The National Association of Consumer Advocates.|
2. Know What Collectors Can and Cannot Do to Collect Debts
Ignoring a debt collector won’t make the debt or the collector go away. In fact, it could make your financial problems even worse. It could force the debt collector to take more drastic actions, like filing a lawsuit against you.
But there’s also a lot of confusion about how far debt collectors can go to get your money. Here are the answers to some commonly asked questions.
Can Collectors Sue Me or Garnish My Wages?
Debt collectors can serve you with a court summons to sue you in an attempt to collect a debt, which could result in wage garnishment. But they can only sue within the statute of limitations.
In most states, the statute of limitations to sue for debt is three to six years. Collectors will still continue to try to collect on the debt — in an attempt to restart the the statute of limitations — but if you’re sued past it, you could likely get the case thrown out.
The statute of limitations on a debt begins on the last date of activity on the account.
Fun fact: Debt that collectors come for after the statute of limitations has passed is called zombie debt.
Can I Go to Jail for Being in Debt?
There are very few situations that could result in you getting arrested over an unpaid debt, according to the CFPB: First, if your debt is related to criminal activity — unpaid restitution for a crime, for example — and second, if you ignore a court order. In most other situations, you won’t be arrested for unpaid debt.
So basically, if you don’t do anything illegal or ignore a court summons, you’ll be safe.
Further, it’s illegal for a debt collection agency to threaten you with arrest if jail time is not an actual punishment that could happen. If you were told you’d be arrested for unpaid debt and you later find out that was false, you can file a complaint.
Can a Debt Collector Make Me Pay a Family Member’s Debt?
If you receive a call from someone trying to locate a relative, it’s probably a debt collector. These calls are legal, but they can only call you once — and only to locate the debtor.
If you receive any more calls or are asked for any information other than your family member’s location, you can file a complaint.
Rest assured that if you didn’t co-sign for the debt in question and the person is not your spouse, you typically have no responsibility for the debt, in life or death.
What Should I Do if I Can’t Pay?
If you can’t pay the full amount you owe or the monthly minimum payment, work with your creditor to create a payment plan for the debt or seek help from a credit counseling agency.
A credit counseling agency is a nonprofit financial institution that will set a debt-management plan for you to repay your debt.
The agency pays your creditor for you and stops fees and charges on late payments, lowering your debt burden and ensuring you stay current. Through these agencies, you can usually pay off your debt in three to five years, and your credit score may even improve during that time.
3. Check Their Facts
If you think a collector’s information is wrong, go with your hunch. When debts get sold between companies, lots of information can get lost in the swap. And even if you’re wrong, your due diligence could work out for you in the end.
Daniel Gillaspia, attorney and owner of travel rewards website UponArriving, and his partner, Bradley, learned this when Bradley got denied for a credit card. After the denial, Bradley saw in his credit report that a $1,000 medical debt had been sold to collections, which he thought had reset the statute of limitations.
“We didn’t feel this was fair,” said Gillaspia. “So I sent a legal demand letter to the collections agency.” It turns out the update didn’t move up the statute of limitations, and the inquiry worked in their favor.
Once the company received the demand letter, the account had to be reported as “in dispute” while it verified details. Once they agreed on the settlement amount, the company agreed to take the collections account off Bradley’s credit report.
4. Keep Detailed Records
It’s important to remember that debt collectors have a job to do. They are not your allies. It’s up to you to keep track of every letter, email and phone call.
You have a right to record phone calls with debt collectors. Just make sure you notify them before you start recording. If they refuse to be recorded, hang up and reach out via email instead so that everything is in writing.
If you forget to record a call, keep detailed notes about what you discussed. This will come in handy if you ever need to file a complaint against an abusive debt collector or have to fight in court to prove that the debt isn’t yours.
And once you’ve settled, don’t throw those records away. You could need them again.
Raeshal Solomon, author of the “My Little Banker” series, settled an old college debt and made sure to get the settlement receipt showing her $0 balance emailed to her and sent to her home.
“In the past two years, that same debt balance has been sold to three other agencies,” Solomon said. “Every time I get a call from a new agency, I kindly get their email address and forward them a copy of my receipt. After a few days, the calls stop.”
5. Take Control of the Communication Process
If the calls are incessant and you want them to stop, be sure to request the change in writing. This can be via email or a physical letter. The CFPB provides a series of template letters to help you communicate with debt collectors in writing.
In most cases, dealing with a debt collector might be a little unpleasant, but in those situations when a collection agency violates the law with nonstop phone calls or threats of violence, you’ll need to file a complaint.
Filing a complaint with the FTC or the CFPB will usually be enough. In extreme cases, you can either report the harassment to your local law enforcement agency or the FBI.
Staff Writer Jen Smith updated this article, originally written by former Senior Writer Desiree Stennett.