You owe money, and a debt collector is calling you night and day. Or maybe you don't owe money, and a debt collector is calling you night and day. Collectors are applying the thumbscrews -- often illegally -- as recent complaints to the Federal Trade Commission bear out.
But the federal Fair Debt Collection Practices Act protects you from abusive and annoying practices on the part of third-party collection agencies -- companies that buy debts from creditors and attempt to collect on them -- and collection attorneys. The law does not cover collection attempts made by creditors (but some state laws do). Virtually every state prohibits serious harassment no matter who does the collecting. (To learn the law in your state, visit www.privacyrights.org.)
Here are six steps to take when a collection agency hassles you.
1. Get the facts. In its first letter, the collection agency must provide you with the name of the creditor, the amount of the initial debt, a breakdown of penalties and interest, and an explanation of your rights. If the collection agency calls rather than writes, get the details on the phone and remind the caller that you are entitled to the written information within five days.
Ask for an address and a phone number so you can follow up if necessary, and start a file that includes a record of every call and a copy of every document involved in the claim.
2. Set the record straight. If you don't recognize the debt, or know you're being dunned in error, write a letter disputing the claim to both the collection agency and the creditor. Include details, dates and copies of any supporting paperwork, and send the letters by certified mail, with a request for a receipt, within 30 days of the first written notice. The burden is on the agency to make its case -- say, by providing a copy of the creditor's judgment. If it doesn't, you're in the clear, for now. Agencies sometimes sell their accounts to other collectors. Be prepared to fight the claim all over again.
3. Hang up on harassment. Collection agencies are prohibited from calling you between 9:00 p.m. and 8:00 a.m. and from using abusive or threatening language. If you don't want to be called or contacted at all, write to the agency and say so. It must abide by your terms, although it can send one more notice telling you how it will proceed. If your lawyer writes the letter, the agency must communicate only with him or her.
4. Agree on a plan. If the debt is yours, work with the agency to come up with a realistic plan for paying it back. "Don't promise something you cannot do," says Robert Markoff, of the National Association of Retail Collection Attorneys. Debt collectors would rather adjust the terms of repayment than face future defaults, he says. "They want payments that come in like clockwork, so they can move on to the next case." Fail to come to terms and you could end up in court; lose there and the agency wins the right to put a lien on your property (certain property is exempt) or have your wages garnished.
5. Tell the authorities. Still have a problem? Complain to the Federal Trade Commission (www.ftc.gov), which enforces the Fair Debt Collection Practices Act. Your complaint, added to others, can help it identify and pursue the most egregious bad guys, although it probably won't help get your case resolved. Also contact your state attorney general's office. Depending on state law, that office may be willing and able to pursue your case.
6. Sue the bums. You can sue a collection agency that flouts the federal law and collect statutory damages of up to $1,000, plus real damages and attorney's fees. Many lawyers will take your case on a contingency basis or charge a fee of, say, $25 to $100, says Robert Hobbs, of the National Consumer Law Center. Some will also represent you in serious cases involving collectors who are not covered by the federal law. To find a lawyer in your area, go to www.naca.net.