Debt Collection Laws

A quick guide to how Debt Collection Laws protect you from aggressive and unscrupulous debt collectors if you are past due on your bills...

Our nation's consumer protection agency, The Federal Trade Commission (FTC), is the enforcer of the Fair Debt Collection Practices Act (FDCPA).  This Act forbids debt collectors from practicing  unfair, deceptive, or abusive  tactics in trying to collect outstanding debt.

If  you are in foreclosure because you are behind on your mortgage payments, chances are that your are also late on your other financial obligations.  Your phones are probably ringing off the hook from collectors auto-dialing your number to get a hold of you to ask for payment.  To reduce the stress and fear, you must learn your rights as a consumer and the laws that protect you form unfair practices by your creditors.

Debt collectors include lawyers who are collectors, collection agencies, and companies whose business is to buy outstanding debt for the purpose of collecting more than what they purchased the debt for, and making profit.

Debt Collection Laws Overview

1.  Types of Debt Included

The types of debt under the FDCPA are household and personal debts such as auto loans, medical bills, credit card debts, and mortgages.  

2.  Debts Not Included

Debts you accumulated running a business is not included under the FDCPA.  So if you have business loans, collectors may be more aggressive pusuing their collection activities with you.

3.  Time and Place of Collection Activities

Debt collection laws forbid collectors from contacting you before 8 a.m. and after 9 p.m., which are considered inconvenient times of the day,  unless you permit your collectors to do so.  

Collectors will also try to contact you at your place of work, but if you tell them verbally and/or in writing that you are not allowed to take their calls there, the collectors must stop contacting you at work.  If they fail to comply, you can file a complaint with the Federal Trade Commission (FTC) and also with your State Attorney General's Office.  They will enforce debt collection laws, exercise appropriate penalties, and take corrective action against the non-compliant collectors.

4.  How to Get Debt Collectors to Stop Contacting You

Debt collectors will try to make contact with you every which way they can, and will at some point connect with you.  Depending on what your plans are for repayment or extinguishment of your debt, you may choose to communicate with the collector regarding the resolution you've chosen, or you may ask them to stop contacting you all together.  You may do so via a certified letter with a request for a return receipt.  Make sure you make copies of any correspondence with your collectors and file everything in a safe place.  

After you write your collectors to stop contacting you, they may not contact you again except for two reasons:  1) to tell you there will be no further contact, or 2) to let you know they are taking legal action against you.  They can do this because you still owe them the money and they can still sue you for payment of your debt.

5.  Debt Collectors Contacting Other People About Your Debt

Yes, debt collectors can contact other people about your debt.  They may contact your attorney if you are represented by one.  They may also contact other people, but according to debt collection laws, they may only do so to collect information such as your address, home phone number, and your place of work.   Collectors are not allowed to contact third parties more than once and they are not allowed to talk about your debt with them.  The only third parties they can discuss your debt information is with your spouse and your lawyer.

6.  If you Get Sued

If you get sued by a debt collector for non-payment of a debt, you or your lawyer must comply with the instructions to respond within the specified amount of time (usually within 30 days) in order to preserve your rights and avoid a default judgment.  

7.  When a Debt Collector Violates Debt Collection laws

If you have clear evidence that a collector has practiced illegal collection practices with you, andyhou believe that they have violated debt collection laws, you can sue your debt collector in a state or federal court.  You must do it within one year of the violation.  If you prevail, the court can order your debt collector to pay you for damages you've suffered like medical bills and loss of wages.  The court can even order your debt collector to pay you $1000 although you aren't able to prove that you suffered actual damages.  Class action suits against a debt collector are also allowed and if the suit prevails, plaintiffs may collect up to $500,000 or one percent of the debt collector's net worth, which ever is lower, plus attorneys and court fees.

Please note that your debt does, if you owe it, does not go away even if your debt collector was in violation of debt collection laws from the FDCPA.

8.  Choice of Which Debt to Apply Payments

You are allowed to choose which debt to apply your payments if a debt collector is attempting to collect for more than one delinquent account.  Your collector must follow you instruction for payment, and take care not to apply any payments to any debt you do not think you owe.

9.  If You Don't Think You Owe the Debt

You can ask your debt collector to produce a verification of the debt, and if you don't think you owe all or a portion of the debt in question, per debt collection laws, the collector must stop all collection activities at that time.  You must send your written request for a verification within 30 days of the validation notice.  This is a notice that states the amount you owe.  They must send it to you within 5 days after their first contact with you.  Please note, that your collector can start collection efforts again once they send you a written verification of the debt.

10.  Allowed  Garnishment

Creditors have the right to sue you for debt that you owe.  If they win, a judgment is entered against you for the amount owed.  In order to collect, the creditor can obtain a court order to garnish your bank accounts and your wages.  A portion of your compensation is withheld by your employer to pay off your debts according to the court order.

11.  Garnishment Exemptions

The following are exempt from being garnished by debt collectors:
  • Student Aid or Assistance
  • Wages for Merchant Seamen
  • Veteran's Benefits
  • Military Annuities and Survivor Benefits
  • Civil Service and Federal Retirement and Disability Benefits
  • Social Security Benefits
  • SSI Benefits
  • Service Member Wages
  • Railroad Retirement Benefits
  • Longshoremen and Harbor Workers Death and Disability Benefits
  • FEMA Federal Disaster Assistance
  • Compensation for Injury, Death, or Detention of Employees of U.S. Contractors outside of the U.S.
  • Foreign Service Retirement and Disability Benefits

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