Falling behind on bills can be a major source of stress for individuals and families because of what can occur if they fail to reduce that debt in a timely manner. Collection agencies make a business of aggressively collecting on bad debts and are not afraid to hound their targets to the point of humiliation. However, collectors are bound by law to operate under certain debt collection procedures.
Harassment from debt collectors can be avoided. Individuals dealing with debt are afforded protection under the Fair Debt Collection Practices Act. This act covers personal, family, and household debts – things like credit card debt, mortgages, auto loans and medical bills fall under this umbrella of coverage.
Debt collection agencies must adhere to specific debt collection procedures. A debt collector must send written notice indicating how much money you owe, the name of your creditor and what action you need to take if you believe the debt claim is in error.
If you send a written letter disputing the debt within 30 days of receiving the initial collection agency letter, the debt collector cannot contact you again until they provide proof of the debt. It is important to send the letter via certified mail and pay for a return receipt, so you have proof that the debt collector has received your letter.
The Fair Debt Collection Practices Act – What Collectors Can and Cannot Do?
Debt collectors operate under many restrictions meant to protect a debtor from harassment. The Fair Debt Collection Practices Act prevents collection agencies from taking the following actions as part of their debt collection procedures:
- Using obscene or abusive language.
- Continually making harassing phone calls
- Calling on debts before 8 a.m. and 9 p.m.
- Talking to third parties, other than the debtor’s attorney, about the debt in question.
- Misrepresenting the actual debt amount.
- Falsely claiming to be an attorney, law enforcement official or credit bureau representative.
- Threatening a lawsuit, garnishment of wages or property seizure without actual legal action.
Debt collectors are allowed to contact third parties to obtain personal information such as your address, your home phone number and your place of employment. This is often referred to a “skip trace.” If a debt collector files a lawsuit to obtain payment on a bad debt and wins a judgement in their favor, your future wages can be garnished to meet the terms of the judgement.
How to Handle Bad Debt
Once you receive a debt collection agency letter outlining the debts you owe, there are actions you can take to eliminate any bad debt.
One good idea is to negotiate to pay a percentage of the debt. Some collection agencies will settle for whatever payments they can get. This means you have a realistic chance for working out a deal to pay less than the full amount.
If you do work out a deal with a debt collector, get the details of the deal in writing before you send any payment. Then pay using a cashier’s check instead of a personal check, so the collection agency does not have access to your bank account.
It is also important to keep track of all phone calls and correspondence with any debt collectors. Write down the day and time for every phone call they make, the name of the collection agency, the amount of debt claimed by the agency and a summary of what was said.
Keeping a paper trail can protect you from any debt collectors misrepresenting your words or actions down the road.