Most creditors pursue recovery measures by either hiring the services of a debt collection agency or following the case up through their in-house debt recovery programs.
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There are times when debt collection agencies may go overboard with their tactics, which may lead to harassment of the debtor. To curb the free hand antics of the debt collection agencies and to shield the debtors from any form of harassment, the federal government has firmly put in place certain debt collection laws that need to be followed by debt collectors.
Therefore it assumes great significance to be aware of these debt collection laws. Here is what will put you to terms with debt collection laws:
Fair Debt Collection Practices Act (FDCPA)
The FDCPA is replete with debtors’ rights, laws, protocols and directions to be adhered to by debt collectors. The FDCPA is one of the most comprehensive acts when dealing with debt collection issues. Here is a peek into the major directives of the FDCPA:
1. Applicability: The FDCPA primarily applies to third parties that are hired to recover debts. In-house debt collection departments are kept outside the purview of most of the rules under the FDCPA.
2. Hours of contact: Debt collectors can contact debtors only between 8 am and 9 pm. In addition, it will be considered as non-adherence to the law if a debt collector reaches out to a debtor at a time specified as “inconvenient” by the debtor. Also, if a debtor has specified reasonable time periods during which he/she does not wish to communicate, the debt collectors need to oblige.
3. Forbidden places of contact: The collectors need to honor the request of the debtor in case the debtor does not want to be contacted at his/her work place.
4. Zero tolerance to abuse or threatening gestures: The debt collectors cannot abuse, demean or threaten a debtor while pressing on debt recovery. Any talks of publicizing a debtor’s account, blemishing a debtor’s credit report, or threatening the debtor with a legal action which the collector is not empowered to take, shall be treated as breach of the law. The use obscene language is strictly forbidden.
5. Action at law: Debt collectors can register cases against debtors only with the state of residence of the debtor, or with the state under whose jurisdiction the account was initially opened/contract signed by the debtor.
6. Forbidden to contact other parties to reach a debtor: Debt collectors must contact your attorney in lieu of you in case you have an attorney looking after your case. In the absence of an attorney, collectors may reach out to people known to you – only to figure out your contact address, phone number and place of work. They are forbidden to disclose debt issues to any individual other than your spouse, attorney and yourself.
7. Provide identity: The debt collectors need to provide their identity to the debtor. It should be made known to the debtor that he/she is dealing with a debt collector. Any subsequent communication (verbal/written) should state the following sentences verbatim:
“This is an attempt to collect a debt. Any information obtained will be used for that purpose.”
8. Validate the debts: Debt collectors are obliged to provide statements of proof validating the debts, if asked for by a debtor. Once such a request is received, it is mandatory for the debt collection agency to respond within 30 days and provide the debtor with the proof of debt, creditor’s name and address and phone number. Any further communications need to be stalled until the debtor receives the requested information.
9. Inform debtors about their rights: Under the FDCPA, debt collection agencies need to inform the debtors about their right to challenge the debt.
10. No embarrassing modes of contact: The debt collectors cannot use a mode of contact that publicizes the nature of the correspondence. Contact by post cards, or the use of envelopes with any markings that reveal that it is a debt related correspondence is prohibited. The debt collection agency can use its name in case it does not reveal the nature of their business.
11. Provide accurate and justified information: The debt collection agencies are barred from making any false or unrealistic claims against debtors. Putting up inaccurate information on a debtor’s credit report is in violation of the act.
12. State laws: In addition to the centralized debt collection laws, many states have additional debt collection laws that apply to debt collection issues.
In any case it would be best to consult a debt management professional or counselor in order to know what laws are applicable in your case.