Consumers that pay their bills late, or don't pay them at all, may eventually receive a call from a debt collection agency. This is usually the final step in a lender's dunning process. When that happens, it's important for the consumer to know the rights they have under the Fair Debt Collections Practices Act.
In this article, we're going to first talk about the dunning process. Next we're going to discuss everyone's rights under the Fair Debt Collections Practices Act. Finally, we're going to provide information that can help consumers to determine if they've been the victim of illegal debt collection practices.
The Dunning Process
When companies provide goods and services to customers, they expect to receive payment from those same customers; usually stated as revenues. Unfortunately, not every customer pays for the goods or services received, and that's where a company's revenue protection policy comes into play.
Dunning is the name given to the process of methodically communicating with customers in the hope of collecting monies owed. These communications usually start with gentle reminders in case a customer inadvertently forgot to send a payment.
Over time, and if payment is not received, the dunning process gets more aggressive in the form of more "firm" letters or outbound collections calls to the customer. If unsuccessful, the dunning process ends when a company sells the accounts receivable to a collection agency, and writes off any uncollected money.
Fair Debt Collections Practices Act
The Fair Debt Collections Practices Act, or FDCPA, was developed under the Consumer Credit Protection Act, and its purpose is to reduce or eliminate the offensive or abusive practices typically associated with the collection of consumer debt. The FDCPA promotes both fair debt collection practices as well as provides consumers with a forum for obtaining and disputing debt information.
Debt Collection
By definition, anyone that owes money to another entity is a debtor. This includes both credit extended in the forms of a credit card as well as borrowed money such as loans and mortgages. Anyone that falls behind in making their scheduled payments runs the risk of entering a company's dunning process, which may include contact by a debt collector.
Consumer Rights under the FDCPA
Fortunately, the FDCPA requires debt collectors to treat people fairly, and the following list provides just some examples of the protections offered:
Contacting Debtors: a collection agency is allowed to contact individuals by mail, telephone, telegram, or fax. These contacts must not occur at inconvenient times or places. For example, contact cannot be made before 8:00 a.m. or after 9:00 p.m. unless they have the debtor's permission. Debt collectors are not allowed to contact someone while they're at work, if they know the employer disapproves of such contact.
Stopping Contacts: it is possible to stop a debt collector from making contact simply by writing to the agency and asking them to stop. Once the agency has received this letter, they are allowed to make one final contact if they intend to take a specific action, such as filing a lawsuit.
Contacting Others: the collection agency is permitted to contact certain individuals, including an attorney or other people, they believe might know where the debtor lives, works, or to locate a telephone number. In general, the collector is not permitted to tell anyone, other than an attorney, that a debtor owes money.
Written Notices: within five days after first making contact, the collection agency must send a written notice outlining the money owed, the creditor's name, as well as any actions the debtor can take to dispute the amount owed.
Prohibited Practices
Now that we've reviewed the allowable debt collection practices, it's time to talk about some of the illegal, or prohibited, practices. Agencies that use these methods to collect money are in violation of the FDCPA.
Harassment
Debt collectors are not allowed to harass or abuse debtors or any third parties they might contact in an attempt to locate a debtor. This includes threats of violence, publishing lists of people owing money, using profanity or obscene language, or using the telephone as a way to harass someone.
Making False Statements
Collectors may not use false statements in an attempt to coerce someone into making a payment. This includes misrepresenting themselves as attorneys or government officials, accusing the debtor of committing a crime, or claiming they work for a credit agency.
Collectors are not allowed to misrepresent the amount of money owed, or pretend that a form is a legal document when it is not. In the same way, collectors are not allowed to pretend that a legal document is not a legal form. They cannot send false documents or credit information to credit agencies.
Collectors cannot threaten someone with arrest for not paying a debt, and they cannot threaten to garnish wages, or sell someone's property, if they are not legally entitled to take such action. They cannot threaten to file a lawsuit unless the agency intends, and is legally entitled, to do so.
Unfair Practices
Debt collectors are not allowed to take more money than owed, unless the state explicitly allows such a practice. It is unfair for a collection agency to trick someone into accepting toll calls, or paying for telegrams. They also cannot attempt to contact someone using postcards.
Reporting Violations
Anyone that thinks they've been a victim of a prohibited debt collection practice has the legal right to sue the collector and / or their agency, in a state or federal court. Individuals have up to one year after the violation occurs to file the lawsuit against the collector. If the lawsuit is successful, it's possible to recover damages, court costs, as well as attorney fees.
Complaints can be reported to the state's Attorney General's office and / or the Federal Trade Commission. More information on the process of reporting a violation can be obtained by calling 1-877-382-4357.
Additional Resources
- The credit industry continues to evolve, and the latest development is the migration from the traditional FICO score to what's called VantageScore. The scale of this score varies from FICO, so the numerical value of what's considered a good score has changed too.
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