Fair and Unfair Debt Collection Practices
That popular Machiavellian view of the end justifying the means in debt collection never applies.
Attempts to collect the debt via deceptive or misleading representation and other unfair practices may equate to trouble for the collecting party. And that's because when you ask a delinquent customer to pay a debt, federal law and fair debt collection practices should always be followed.
But what are those? What can debt collectors do and not do when collecting debts from you?
Why are debt collectors involved?
Many imagine a hard-hearted, melodramatic villain who threatens to cast widows and orphans into the street because the rent is overdue when they think of the traditional debt collector.
It's tempting to paint these people as evil monsters out to ruin lives, and historically some of their actions haven't exactly been admirable. Still, it's vital to remember that no one is compelled to borrow money. If you have debt, it is because you choose to borrow money. Your agreement to repay the loan or credit line was a requirement set forth by your lender.
A debt collector is merely attempting to recover the money you are morally and legally required to pay your creditors. Your creditors do have a right to their money.
The debt collection procedure typically consists of three stages:
- You typically interact with your creditor's internal collector during the first six months of your delinquency. Since there is no intermediary involved and your lender still has a reason to want to keep a good connection with you, this might be the perfect time to attempt and settle your loan.
- When your lender determines you won't pay back your loan, it will be transferred to an outside entity, referred to as a third-party agency. The original creditor is still the loan owner and is still owed money from it. Your creditor will pay the third-party agency a commission, which may take the form of a fee or a percentage of the total amount outstanding if it successfully recovers all or part of the debt.
- The final step involves your original creditor writing off your debt and selling it to an outside collection firm, often known as a debt buyer, frequently for pennies on the dollar. There is no longer a creditor involved. The collection agency is still working to recover as much debt as possible to make money on its purchase.
Instead of using typical bill collectors, creditors have begun turning over more of their past-due accounts in recent years. The rationale is that a lawyer's communications will be taken more seriously, increasing the likelihood that collections will be paid.
What are unfair debt collection practices?
According to a federal law called the Fair Debt Collection Practices Act (FDCPA), a debt collector is not permitted to employ unfair techniques to collect a debt.
A debt collector, for instance, cannot:
- Attempt to collect fees in addition to the debt unless the contract or state law permits them
- An early postdated check deposit
- Send you a postcard to talk with you about a debt
- Use any words or symbols that identify it as a debt collector on an envelope for correspondence with you (apart from its address)
This federal legislation also prohibits using fraudulent, deceptive, or misleading tactics by debt collectors. This comprises:
- Misleading representations or lies about the debt, especially about how much is owed
- Falsely claiming to be an attorney to contact you
- Threatening you with arrests
- Threatening to take actions that are illegal or that the debt collector has no intention of taking action.
Additionally, a debt collector has no right to harass you. Additionally, there are regulations at the state and federal levels that typically forbid conduct that could be viewed as unfair, misleading, or abusive.
If you think you're being subjected to unfair debt collection practices, there are so many steps you can take. First, you may file a complaint or a lawsuit against the debt collector if they violate the Fair Debt Collection Practices Act or FDCPA.
In general, if you challenge a debt collector under this federal legislation and prevail, they are required to pay your legal expenses. They may also be required to compensate you for damages.
What Fair Debt Collectors Do
Ultimately, a fair debt collector will do their job, and that's to ask you to pay up your balance.
Debt collectors are allowed to contact you via any method of communication, including phone, letter, email, or text message. Still, they must follow specific guidelines to avoid breaking the Fair Debt Collection Practices Act (FDCPA).
What should they do when communicating with you? First, they must declare that they are a debt-collecting firm and include their name and business address.
They will also provide information on how to contest the debt or request proof of it, as well as the creditor's name.
Within five days of the initial contact, the debt collector must also submit a written notification with the verification information if he did not supply it during the original conversation.
To convince the debtor to settle their account, these agents also employ a variety of tactics, such as contacting the debtor's home and office phones and occasionally showing up at their door.
Collection agents may also make contact with the borrower's family, friends, and neighbors to validate the contact information they have on file for the person. Still, they are not permitted to reveal why they attempt to get in touch with them. Additionally, an agent may decide to mail the debtor late payment notices. Debt collectors make sure the debtor has their full attention in any case.
To Wrap It Up
Debt is an obligation one must never run away from—but just because it’s a must-do doesn't mean debt collectors have the right to harass or threaten you to pay up.
There is due process, and only legitimate debt collection agencies abide by these rules and still have the talent to end up successfully collecting debt from delinquent payers.