Collection is the process by which creditors attempt to get payment from non-paying debtors. The collection of unpaid debts can be performed by the creditor or by a collection agency. A debt collection agency is a business that is hired by creditors, that is, other businesses who are owed money by debtors. A “debtor” is a person who has borrowed money in whatever form and has not paid it back. For example, a debtor may have borrowed money to buy a car and stopped making loan payments.
Collecting Money Owed to Me
There are several debt collection practices that a person can use to persuade a debtor to pay a debt:
- Reminder invoice: Send the debtor another invoice to remind them how much the debt is and that it still needs to be paid;
- Formal demand notice: Send the debtor a letter stating that the creditor demands timely payment;
- Call or visit the debtor: If the laws of the debtor’s state allow it, personally call or visit the debtor and ask them to pay the overdue bill;
- Hire a collection agency: A person can ask a collection agency to persuade the debtor to pay. A collection agency typically takes a percentage of the money it collects from the debtor as compensation for its service; Should a person choose to hire a collection agency, they should be sure to check the agency’s credibility with the Better Business Bureau and the Attorney General’s Office of the state in which they live.
What Can a Collection Agency Legally Do to Collect Payments?
Collection agencies sometimes use aggressive tactics to collect money owed. Their actions, however, must not violate the Fair Debt Collection Practices Act (FDCPA). This act limits what a collection agency can do in its effort to collect payments. The FDCPA was adopted for the purpose of ending abusive, deceptive, and unfair debt collection practices. The FDCPA limits three categories of conduct by collection agencies and other debt collectors. They are:
- Harassing or abusive practices;
- False or misleading representations;
- Unfair practices.
For example, forbidden harassing or abusive practices include such conduct as:
- Making threats of violence or harm to a debtor;
- Contacting any third party about the debt owed; so, for example, a collection agency cannot contact the debtor’s employer and tell them about the debt that is owed;
- Using obscene or offensive language;
- Using the phone to annoy or harass someone;
- Falsely representing themselves as attorneys, government officials, or any other entity;
- Making false or misleading statements;
- Declaring that they will take unlawful action if payment is not made.
Examples of the type of false or misleading representations that are forbidden include:
- Falsely representing themselves as attorneys,
- Falsely representing themselves as affiliated with the federal government or a state government or using a badge or a uniform or similar identification;
- Falsely representing the status of the debt, for example, stating that is larger than it is or otherwise mischaracterizing the nature of the debt;
- Falsely representing that if the debtor does not pay, they will be arrested or imprisoned;
- Distributing documents that are falsely made to appear as though they have been produced by a federal or state government agency.
Examples of the type of unfair practices that are forbidden include:
- Soliciting a post-dated check to use as a threat or to start criminal proceedings;
- Causing charges for communications such as telegrams or collect phone calls to be made to the debtor by concealing the true purpose of the communication as a debt collection communication.
- Threatening to repossess or disable the debtor’s property when the collection agency has no right to the property or to disable it; so, for example, a collection agency cannot threaten to repossess or disable property such as a car, if they do not have the legal right to do so.
There are also several things a collection agency is required to do once it has contacted a debtor. The collection agency must state:
- The amount of the debt;
- The name of the creditor;
- The timeframe in which the debtor can dispute the amount owed.
A debtor has certain rights under the FDCPA also. For example, if a debtor refuses in writing to pay a debt or asks that the collection agency (or other debt collector) stop communicating with them, then the collection agency must stop all communication except to tell the debtor that:
- The collection effort is being stopped;
- Certain specific remedies will be pursued or a certain remedy is being pursued; for example, the collection agency might inform the debtor that they will file a lawsuit in court in order to recover the money owed;
- Mail notices from the debtor are official only when received by the collection agency.
The FDCPA also places limits on whom the collection agency may contact in its efforts to collect a debt. The only people, other than the debtor, whom a collection agency (or other debt collector) may contact are the following:
- The debtor: This means that a collection agency can talk to the debtor, that is, the person who owes the money, themselves. But it cannot, for example, contact the debtor’s neighbors, friends or relatives about the fact that the debtor owes money;
- The debtor’s attorney;
- A credit reporting agency, if this is permitted by state law in the state where the debtor lives;
- The debtor himself or herself, except that even this communication can be limited as described above;
- The attorney for the collection agency or business that is owed the money;
- The collection agency’s attorney.
There are exceptions if the collection agency cannot find the debtor. Then it may ask a 3rd party (someone other than the debtor) for the debtor’s current address, telephone number and place of employment.
If the collection agency makes this kind of contact, the person making the contact must identify themselves truthfully to the contact and truthfully state their purpose, which is confirming the debtor’s location only. They may not name the collection agency or say that the debtor owes money, unless specifically asked by the contact.
What If a Collection Agency Has Violated the FDCPA?
There are several things a debtor can do if a collection agency has done something illegal, that is, something that violates the FDCPA. These include:
- Ask them to stop: A debtor can tell the collection agency that they should stop contacting them. If a debtor does this, then the collection agency can no longer contact them except to give notice that they are filing suit to collect the amount owed. Or they can tell the debtor that they will stop trying to collect the debt. .
- Complain to the FTC: A debtor can write to the Federal Trade Commission (FTC) and inform them of the collection agency’s violation.
- Sue the collection agency: If the collection agency has violated the FDCPA, a debtor may want to sue the collection agency. A debtor who has been victimized by a collection agency may be entitled to normal damages in addition to statutory damages of up to $1,000 for violations of the FDCPA.
Do I Need an Attorney for My Collections Problem?
If you are being harassed by a collection agency or other debt collector, you should by all means contact an experienced debt collection lawyer. An experienced debt collection lawyer can tell if a collection agency is violating the law. They might be able to send a demand letter to a collection agency to make the harassment stop.
If you are forced to go to court, an attorney can guide you through the legal process. Whether you are the debtor or the creditor, a lawyer will know all the ins-and-outs of debt collection and help get the results you want.