Debt collection is a somewhat opaque industry, and that can make it confusing for both the debtor and the collector. Not only are there stringent regulations around how each party can operate, but there are also state laws that govern the debt itself and how long it takes to expire.
As a result, both collectors and debtors need to educate themselves as much as possible to ensure that they understand what their rights are and how they should operate. These twelve rules are some of the most important and guide you into the debt collection industry and how it works.
Debtors Have Rights
A collector has the right to collect the money that they are owed, but they still need to obey the Fair Debt Collection Practices Act, which governs how they can go about collecting the money. As a debtor, you have the right to feel safe, to understand your debt and to talk freely without threat about how you can best pay that debt back.
Old Debts Expire
While a debt itself never disappears and a company can continue to try and get you to pay it back, states have their limits as to when a collector can sue you. Typically after four to six years after your last made payment, a collector can no longer sue you.
Zombie Debts Exist
However, even after this time, it’s possible that you can still restart the clock. Debt holders often resell the debt, and new collectors can call you, and even if you acknowledge that the debt is yours, the timer can be restarted, and you can be forced to repay it, or they can sue you. This resurrection is often known as a zombie debt.
Collectors Can’t Inflate the Debt
Although a collector is entitled to the interest upon a loan, they can not spike up the total amount for no reason or as a threat for late payment. The total amount to be paid will equal what was in your contract, and anything else isn’t owed.
There are Calling Rules
Some unscrupulous collectors hound their debtors, calling them constantly at all times of night to pressure them into paying what they are owed. However, according to the FDCPA, collectors can’t call you before 8 am or after 9 pm and not at work once you tell them not to or too many times in the day. They should all not cuss or call you names. Breaking these rules is in violation of rules to maintain their debt collection license.
Collectors Often Negotiate
It’s unknown by many, but collectors will often negotiate with the debtor to agree to a lower amount. Debt Collectors usually purchase debts for a fraction of the total cost, and therefore they can still make a profit. However, make sure to agree to a written contract before you send any money over.
Debt Won’t Send you to Jail
Debt is a civil issue, and therefore debt alone cannot send you to jail. Collectors that talk about jail time can be reported to the appropriate boards for breaking the rules and regulations that they are held to.
Lawyers are Often ‘Free’
While no lawyer is free, many will work at no cost to you if they think a collector has broken the law because they will collect their fee from the plaintiff.
Debt Can’t Be Inherited
Even a relative or friend dies and leaves something in their will to you; you will never inherit a debt. Instead, the debt is collected from the estate and not the friends or family.
Debt Collection can Hurt Your Credit
While debt doesn’t always impact your credit, once it begins to show on a report it can knock your score by 50 or more points. Plus, filing for bankruptcy or continuing to fail to repay debts can have an even more significant effect on your credit score.
No Threats are Allowed
Although often used by debt collectors, threats are not allowed and are strictly regulated by their governing board, the FDCPA. Verbal threats, threats of violence, jail time or financial ruin can all be reported to a governing board and collectors can be sued for these threats.
Debt Collectors Can Be Sued
As a debtor, you can often feel vulnerable, especially if you believe that you didn’t understand the full terms of a loan. However, it’s important to recognize that you do have the right to sue a debt collector. If you feel that you might have a case you should consult a lawyer for a free consultation, who will often take on matters for no fee.
