Protecting Yourself from Predatory Debt Collectors
It's not a crime to owe money. Know your rights when it comes to unethical creditors
Struggling with personal debt is hard enough on you and your family. The last thing you need are unethical debt collectors preying upon you when you’re vulnerable.
But if they do, you have plenty of company. In 2014, the federal Consumer Financial Protection Bureau (CFPB) handled 88,300 debt collection complaints, making it the leading source of consumer complaints to the organization.
“Consumer debt collection is one of the most highly regulated industries, and the consumers have rights and protections under the law,” says Cindy Sebrell, vice president of public affairs at ACA International, a trade group representing the debt collection industry.
Understand your rights
Under the federal Fair Debt Collection Practices Act, collection agencies cannot engage in abusive, unfair or deceptive practices, according to the Federal Trade Commission (FTC). For example, they:
- Can't contact you at inconvenient times or places without your permission
- Can't contact you at work if you tell them that you aren't allowed to receive calls there
- Generally can't talk to anyone but your spouse or attorney about your debt, except to obtain your contact information
- Must talk to your attorney, not you, if you're represented by one
Within five days of contacting you for the first time, they must mail you a “validation notice” that shows how much you owe, whom you owe it to and what to do if you don't believe that you owe that debt.
If you want them to stop contacting you, mail them a certified letter with a return receipt requested. After that, they can contact you just one more time, to confirm they won't contact you again and to tell you if they plan a specific action, such as filing a lawsuit.
They're also prohibited from:
- Lying, such as falsely claiming to be a government agent or lying about how much you owe
- Using obscene or profane language, repeatedly calling just to annoy you, or publishing your name (except to credit reporting agencies)
- Threatening you with violence or to have you arrested
- Threatening legal action or asset seizure, unless they can legally take those actions and intend to do so
The FTC's website lists additional examples of what debt collectors can and can't do when contacting you.
If you want to file a complaint, the CFPB has an online form that allows you to provide details and attach copies of supporting documents. You can call them at 855-411-2372 or TTY/TDD 855-729-2372.
You have the right to sue the debt collector, as long as it's within a year of the date the collector violated the law.
Related: What to Teach Your Kids About Money
Know the difference: original creditors vs. third-parties
The Fair Debt Collection Practices Act covers only third-party collection agencies. It doesn't apply to companies that are collecting debts from their own customers.
However, “a number of states have similar laws that apply to the original creditor,” says Ira Rheingold, executive director of the National Association of Consumer Advocates, an organization of attorneys and consumer advocates. “If an original creditor harasses a debtor, there might be laws in your state that protect you.”
“Our industry wants to get bad actors and scam artist away from the consumers and the industry,” says Sebrell. “If you believe your rights have been violated by an unethical debt collector, contact your state attorney general's office for assistance.”
Verify the debt
Make sure you actually owe a debt before paying it. Even legitimate collectors might be working from incorrect information. “Oftentimes the record keeping by the original creditor or the purchaser of the debt is so bad that the debt collector has no information about you, except for an electronic line of data that could be wrong,” says Rheingold.
Beware the phantom debt scam
Debt collection scams are common. A criminal who is not a real debt collector might call you and harass you about a phony debt and try to convince you that you owe them money. Or they might try to convince you that you should pay your legitimate debts to them instead of to the real creditor.
The FTC and the Illinois Attorney General recently took down one of these operations, in which the defendants allegedly used threats and intimidation against their victims while hiding behind various company names used as fronts.
“Never provide your Social Security number, financial account number or other sensitive personal information until you can verify the other party,” says Sebrell. “You should monitor your financial accounts and immediately report any suspicious or unauthorized purchases to your bank or creditors.”
If you are feeling overwhelmed by debt, says Rheingold, “you shouldn't feel alone. Debt is a gigantic issue in this country. There are a lot of people with a lot of debt, and there are solutions. There are ways of getting out of debt.” (The FTC offers ways to cope with debt here.)