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Your Rights When Dealing With a Collection Agency

If your credit problems have progressed to the point where your creditors have turned your case over to collection agencies, it is important to know your legal rights.

Collection agencies are not allowed to:

• Call your office;
• Call your home before 8 a.m. or after 9 p.m.;
• Address you in an abusive manner;
• Call family or friends in an attempt to collect your debt;
• Harass you;
• Make false or misleading statements; or
• Add unauthorized charges.

If any of the above is happening to you, tell the collection agency to stop harassing you. If it continues, ask for its name and address and report it to the Better Business Bureau, the Federal Trade Commission (see below), or your state's attorney general's office. The federal Fair Debt Collection Practices Act also states that you can demand that the collection agency stop contacting you, except to tell you that collection efforts have ended or that the creditor or collection agency will sue you. However, you must put your request in writing.

Please note: The FDCPA applies only to bill collectors who work for collection agencies, not the original creditors, so you will not be able to get the collection department your credit card company to stop calling you with a letter. Only New York City has a local consumer protection law that requires the original creditor to stop calling you after a written request to do so.

What happens if the collector breaks the law?

If a bill collector violates the FDCPA, try to get the collector back on the phone and repeat whatever you said the first time that caused the collector to make the illegal statement(s). Have a witness listen in on an extension or tape the conversation. Taping is permitted without the collector's knowledge in all states except CA, CT, DE, FL, IL, MD, MA, MI, MT, NH, PA, and WA.

Then file a complaint- in writing. You can even file a complaint if you don't have a witness, but a witness helps. File your complaint with:

Federal Trade Commission
6th Street & Pennsylvania Avenue NW
Washington, DC 20850
202-326-2222

You can even file the complaint online:

Next, complain to your state consumer protection agency. Then send a copy of your complaint to the creditor who hired the collection agency. If the violations are severe enough, the creditor may stop the collection efforts.

If the violations are ongoing, you can sue the collection agency, and the creditor that hired the agency, for up to $1,000 in small claims court for violating the FTC regulations. If the violations are outrageous, you can sue the collection agency and creditor in regular civil court.

Common collections tactics and rebuttals

Some collection agencies do employ collection methods involving the use of false and misleading statements. A common tactic is to insist that you wire the money that you owe through Western Union. They might tell you that if they do not receive the funds immediately, interest might be added to your debt.

Tell them "Nice try" (in other words, "No.") It's only going to add more money to your debt in Western Union fees if you did do it. Many collectors, especially when a debt is more than 90-days past due, will suggest several "urgency payment" options, including:

• Sending money by express or overnight mail. This will add at least $10 to your bill. A first class stamp is fine.
• Wiring money through Western Union's Quick Collect or American Express' Moneygram. This is another $10 waste.
• Putting your payment on a credit card not charged to its maximum. You'll never get out of debt if you do this.
• Provide your checking account number so that they can access your funds immediately over the telephone (or they will "post date" the check for when you know that the funds will be in your account). Are you crazy? NEVER give out your checking account and check routing numbers.

While the FDCPA allows a collector to add interest if your original agreement calls for the addition of interest during collection proceedings, or the addition of such interest is allowed under state law, it is not necessary to spend the money or risk your checking account for an "urgent" payment. The three or four days it may take to mail a payment with a first class stamp, if they do decide to come after you for interest, won't break the bank.

What if I can't pay?

The "urgent payment" scam aside, however, it is generally in your best interest to settle your debts as quickly as possible. Before obtaining a court judgment, a bill collector generally has only one way of getting paid: Demand payment by calling you and sending you threatening letters. If you refuse, the collector can't do much else short of suing you. Once the collector (or creditor) does sue and gets a judgment, however, you can expect more aggressive collection actions:

• If you have a job, the collector will try to garnish up to 25% of your net wages.
• The collector also may try to seize any bank or other deposit accounts you have.
• If you own real property (real estate), the collector will probably record a lien, which will have to be paid when you sell or refinance your property.

Some collection agencies will agree to settle with you for far less than you owe and then turn around and hire another collection agency to collect the difference. However, in many states this is illegal. Once a creditor deposits or cashes a full payment check, even if she strikes out the words "payment in full," or writes "I don't agree" on the check, she can't come after you for the balance. The states in which this law is enforced include:

Arkansas	Colorado	Connecticut	Georgia
Kansas	Louisiana	Maine	Michigan
Nebraska	New Jersey	North Carolina	Oregon
Pennsylvania	Texas	Utah	Vermont
Virginia	Washington	Wyoming

Some states have modified this rule. In the following states, if a creditor cashes a full payment check and explicitly retains his right to sue you by writing "under protest or without prejudice" with his endorsement, then he can come after you for the balance. But those exact words must be used. If he writes "without recourse," communicates with you separately, notifies you verbally, or writes on the check that it is partial payment, it is not enough.