The Fair Debt Collection Practices Act clearly states that, “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”
Yet the FTC received over 300,000 complaints between 2006 and 2011 of collectors who did just that. Unfortunately, complaining about these unfair practices hasn’t done much; only 32 formal enforcement actions were taken by the government against collection agencies over a ten year period (1999-2009). In other words, consumers must both educate themselves with their rights and use precaution and prevention in dealing with third party collection agencies because regulators are not likely to step in.
Illegal and Unfair Practices in Play
It turns out that certain illegal and unfair debt collection practices are prevalent in the debt collection industry. This is because collections agents are paid based on the number (and amount) of debts that they collect, and oftentimes are given bonuses for surpassing their monthly quotas. It is notoriously difficult to collect debts, which is why collection agents have jobs in the first place. And that is also why they will often do almost anything to collect from you.
Here are some illegal/unfair practices and what you should know about them:
- Threats to Seize Property/Garnish Wages: Agencies cannot seize your property or garnish wages without a judgment to do so.
- Telling Others About Your Debt Without Permission: Agencies cannot legally tell employers or other people about your debt without your permission.
- Threaten to Initiate Criminal Complaint: Agencies cannot initiate a criminal complaint against you for fraud.
- Misrepresent Themselves: Agents may try to identify themselves as a fraud investigator on your voicemail to get you on the phone. Other ways that they attempt to misrepresent themselves is by sounding like they are a lawyer or representing a law firm. Their motives for doing this may be to add legal fees onto the debt, to intimidate you, and/or to add oomph to their efforts. There are many rent-a-lawyer offices that are really just debt collection call centers.
- Tell You A Police Car is on the Way to Arrest You: If an agent tells you there is a cop on his/her way to arrest you, do not believe it.
- Harass, Oppress, or Abuse You: They may look through your credit report or bill and attempt to embarrass you about the purchase. If something you purchased was questionable or controversial, such as pornography, they will threaten to tell your family and employer. Other ways they might attempt to harass you are to use profane language or to call you continuously.
Many of the examples above were documented by Fred Williams, a journalist who took a leave of absence to work for a collection agency so that he could write a book about it. These have been experienced by real people and are in many cases quite common.
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Precautions and Preventative Measures You Can Take
Okay, now we know that these illegal tactics exist. So what can you do to protect yourself if you find yourself in one of these ugly situations?
- Identify the Agency: The first preventative measure you can do is to get identifying information from the agency, such as an address and phone number. This will help should you need to log a complaint.
- Keep Records: You need to keep phone/call logs, corral witnesses of people who were called by the agents, and tape record messages/phone calls (check with your state to ensure this is legal).
- Attempt to Negotiate with the Primary Creditor: If you are experiencing a nightmare situation with the third party collection agency, call your primary creditor and attempt to have them reassume the debt so that you can go on a payment plan.
- Log a Police Report for Debt that is Not Yours: Sometimes the only way people know that someone has stolen their credit card and/or fraudulently racked up debt in their name is when a collection agency calls them. If that happens to you, make sure to call the local police and log a formal complaint to show that you are dealing with the matter. Furnish this report to the collection agency, the creditor involved, as well as the credit reporting bureaus.
- Log a Complaint Against the Agency: Log a complaint at www.ftccomplaintassistant.gov; you can do so with only a phone number, though it’s helpful to have as much information as possible.
- Arm Yourself with Information: Ask for a breakdown of the amount owed by debt, fees, interest, and penalty interest (if the amount owed is higher than what is on your credit report, than it is likely they tacked on extra fees which could be illegal).
- Get any Settlement Terms in Writing: Get settlement terms in writing including the account balance, agreed settlement amount, the “settlement in full” phrase, and the collection agency’s obligation to report the settlement to the creditor and to credit reporting agencies. You also want to make sure that your settlement agreement includes the original account number from the primary creditor and not just a new account number given by the debt collection agency.
Debt collection agencies are not stopped by the Do Not Call Registry, and in most cases, they have every right to contact you. So dodging their calls is not the way to deal with the situation. Still, you need to arm yourself with as much information as possible when dealing with a collection agent. Rather, you need to deal with them and report them if they are abusive, or work with them if you can find a way to resolve the debt.
One final thought: if you want to make a settlement agreement with a collection agency, consider doing so at the end of the month. Since agents are trying to meet their monthly quotas, you may get up to 70% off the original debt owed instead of 50%. And that could make all the difference.
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