I once got a phone call from a debt collector. And worse yet, I got it at my office. I was completely unprepared for the call that came as I sat at my desk working at my government job. Within the confines of my gray cubicle — right next to my team leader — the collection agent had me trapped. She had called my work phone number to inform me that I owed $3,400 to the last apartment complex I had lived in while in Florida (I had since moved to Texas).
Back in 2008, while living in that apartment, I was laid off from my second post-college job. Finding myself in a sluggish employment market, I decided that I needed to break my lease and move out of Florida. I tracked down my lease contract and read it closely. It stated that anyone who broke their lease early would owe an extra two months’ rent after vacating.
Fortunately for me, it also stated the lease would be voided after the payment for those two months was paid. I gave my sixty days’ notice around June 1, 2008, moved out on July 31, 2008, and paid my August rent. To my surprise, I was informed by one of the apartment managers that they had found a renter for my apartment starting in September. Under the terms of the contract, this meant that I was only required to pay what had already come out of my bank account. In other words, I was a free woman.
That was the last time I had any contact with the apartment complex. I considered the matter closed, and never thought about it again. That is, until my alleged debt was sold down the river and a debt collection agent called my place of employment.
Primary Creditors Vs. Third Party Collectors
What happened to me was the same thing that happens to many people. A primary creditor (in this case, my apartment complex) attempts to collect on a bill until it no longer makes financial sense for them to do so. They then sell the debt to a third party collection agency. There is actually an entire debt market where anyone who has cash can purchase past-due debts for an amazingly low price: typically 5% of the debt owed (and 2% for older accounts). This also includes charged-off debts, which is debt that is delinquent by at least 90 to 180 days that the lender has decided to treat as uncollectible for financial reporting and tax purposes (note: this means the debt comes off of their books, not yours).
The good thing about having your debt sold to a third party collection agency is that there are specific laws under the Fair Debt Collection Practices Act to protect you from being unreasonably harassed or preyed upon by them. (These same laws do not apply to your primary creditor) The bad news is that collection agencies are notorious for brazenly getting around these laws. Even when they are within their rights — and granted, most of the people they go after do owe money — their tactics and persistence can be vicious.
Legal Debt Collection Processes
A third party collection agency has several obligations to you as a consumer/debtor in order to make their process legal. Here’s what you need to know at each point in the process:
- Prior to the First Phone Conversation: Know that the collection agent is allowed to get a copy of your credit report if the amount of debt exceeds $500. This may not sound like a big deal, except that there is a whole lot of personal and financial information available on this report. Your credit report can ultimately be used in your conversation as fodder for why you should pay back your debt (i.e., if they see that you are making on-time mortgage payments, they may ask “Why can’t you pay us if you can pay your mortgage?”).
- First Phone Conversation: An agent cannot contact you outside of between 8:00 a.m. and 9:00 p.m. In the first phone call, the collection agent is required by law to give you a disclosure along the lines of: “the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.”
- After Initial Contact is Made: Within five days of contacting you, the collector must send a validation notice stating the amount of the supposed debt, the original creditor, and the process for disputing the debt. This letter will also include the statement that, “unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” If the agent has yet to be able to contact you, they are allowed to contact coworkers, friends, neighbors, etc., in order to get your contact information.
Your Rights as a Consumer/Debtor
It is really important to know your rights as the consumer and/or debtor so that you can ensure the collection agency is acting appropriately. Here’s what you should know:
- How to Dispute a Debt or a Portion of a Debt: To dispute debt or a portion of it, send a letter of dispute via certified mail to the debt collector within 30 days of being contacted by them. In order for them to legally continue with collection after receiving your dispute letter, they must first provide you with proof of the debt.
- How to Stop Workplace Phone Calls: Collection agencies may not call your place of work if they “know or ha[ve] reason to know” that your employer prohibits calls. So tell them that your employer restricts non-work-related calls (well, if it’s true).
- How to Cease Collection Agency Communication: A Cease Communication Demand can be made in writing and sent by certified mail. After this, the agency may only contact you to confirm that it has stopped collection efforts, or to advise you that it is pursuing other remedies to obtain payment.
- Obtain a Credit Report: You can obtain your credit report so that you can see what the collection agency is looking at. You may do this once per year for free through AnnualCreditReport.com.
- Check Your Statute of Limitation: On unsecured debts, each state sets a statute of limitation for how long someone can attempt to collect the debt by legal means. Each state is different (check out your state’s statute or the statute for the state where the debt was accrued at www.naag.org), but the average is six years. However, know that collectors are trying to get paid, not trying to take you through legal action in order to get the debt. So they are allowed to continue to collect from you even after the statute of limitation has been met; they just cannot take you to court to do so. (And they will not tell you if the statute of limitation has passed)
If I had Known Back then What I Know Now
According to the collection agent who called my office on that day, they had no record of me paying the August rent, or of any of the conversations between me and the property manager. On top of that, the property manager had told her that the renter they found apparently did not move in until mid-October, so they were charging me for September’s full rent and half a month’s rent in October (which I knew they could not do, per the terms of the contract). To top it all off, they threw in a charge of $690 for the discount I had received over the course of the contract when I had been living in the complex.
I disputed all of this in an email (using that form of communication rather than certified mail was error #2 on my part), as directed by the agent. Not only did I not hear back about my dispute, but I did not hear from anyone until a year later… when my debt had been sold to another collection agency. No surprise, the new agent had no idea about the dispute or my previous conversations with anyone (FYI: debt resale of disputed debts is legal, and happens all the time).
Looking back, the mistakes that I made when dealing with the apartment complex and the debt collection agency are crystal clear. Not getting the manager’s approval in writing for moving someone else into my apartment and assuming my lease was Mistake #1. Not keeping copies of my rent payment in August was Mistake #2, and not sending my dispute via certified mail was Mistake #3 (the agent probably told me to email it knowing that she did not have to answer to it that way). To this day, I still have not heard a word from any of the collection agencies that have held this debt, which was supposedly accrued (I still dispute the charges) seven years ago. Nor has it shown up on my credit report, perhaps because of my emailed disputed.
None of their collection practices were illegal, which is true in a lot of cases. But if you are in a position where you have to deal with debt collectors, it’s important to be very aware of what debt collectors can do within the law. For even more on this topic, check out my next article on illegal and unfair debt collection practices, and how you can prevent them.
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