Phone Bill Debt Collection: Know Your Rights When the Creditors Start Calling

Know your debt collection rights

Having someone call you and demand money you weren’t aware you owed is an intimidating situation. What’s worse is that if you are getting that call, your debt is no longer being handled by the company that you originally did business with—it has now been handed over to debt collectors, who can try every underhanded way in the book to get repayment.

Debt collectors work under the assumption that you don’t know your rights under the Consumer Protection Laws, and will attempt to convince you that you have to pay whatever they say you owe. Also, if your debt has passed to debt collectors, it has likely already affected your credit score—you should check your score promptly to assess any damage.

But remember that you do have rights and options for handling the collection process, and in some cases you may not have to pay anything at all.

Statute of Limitations

While you may not think of it this way, getting a cell phone or entering into most ongoing service-provider relationships—like getting your electricity turned on or opening a checking account—means you’re entering into a contract with another entity. So when you stop paying (even if there’s no malicious intent on your part) you are generally in breach of contract. It’s not uncommon for huge entities like phone or cable companies to make a mistake about when an account is turned off. If the entities are holding you responsible for paying an old account and you’re not paying it, you are probably also racking up late payment fees. But depending on how much time has gone by between your breach of contract and the time when a debt collector starts to contact you, the statute of limitations may have already expired.

Every state has its own statute of limitation laws on debts, and there are also federal statutes that govern certain types of debt. Contact an attorney or your state attorney general office for full details on the limitations for your state, but the time limit is often about six years for state statutes. Cell phone debt has a federal statute of limitations of two years. After the statute of limitations has expired on a debt, it is considered “time-barred.”

A debt being time-barred is a legal classification, but does not mean that a debt collector can no longer contact you, or that you don’t owe the debt. It simply means that a debt collector has no legal right to sue you, and if a debt collector threatens to sue or actually does sue you on a time-barred debt, you can sometimes take legal action against them, as well as file a complaint with the FTC and your state attorney general.

NerdWallet’s Recommendation

Anytime you close an account, speak with a representative. Ask if there are any outstanding payments, and tell the representative that you wish to receive a final bill, and a confirmation notice, once your account has been closed.

However, if it’s too late for that, a good first step to take when notified of an old debt is to verify it. Debt collectors are not required to inform you if the statute of limitations has expired, or tell you when your last payment was made. Also the collection agency might have the wrong information about your debt, or the validity of the claim. You can write a letter to the collection agency explaining that you are disputing the debt and want to verify it. Include as much information in your letter as you can.

Remember, especially when the amount of debt is significant, to consult a professional without delay. Don’t use the method of verifying a debt via letter as a stopgap to put off paying a debt you know you’re legally responsible for.

If an old debt is proven to be time-barred, more options may be open to you. There are three courses of action that you may decide to take with this debt, and all of them have their own consequences that will vary with your individual situation, so again—consulting with a professional before taking any of these steps is highly recommended.

If You Pay Nothing: Although a debt collector has no legal right to sue you or force you to pay your debt if the statue of limitations has expired, you still technically owe the money. A collector can still legally contact you until you send them a letter requesting contact to stop, and unfortunately debt collector harassment sometimes still persists even after sending these letters. A decision not to pay a time-barred debt can negatively affect your credit score since you have left a debt unpaid.

If You Make a Partial Payment: In certain states if you make a partial payment on a debt, or even make the promise of making a payment in the future, the debt is “revived” and the clock on the statute of limitations resets, meaning now debt collectors can sue to you to get the rest of the full amount of the debt.

If You Pay Off the Debt: In the event you decide to pay off the debt in full, you can request a signed form or letter from the collection agency before making any promise to pay off the debt. The letter should state that the entire debt is being settled and that the amount agreed upon will release you of any further obligation to the debt. It is also possible to ask for a “pay on delete” agreement, which asks the debt collection agency to erase the negative report from your credit report upon payment. A template form requesting this option is available here.

Lastly, although it is against the law for a debt collector to sue you for a time-barred debt, they may not actually know that it is time-barred. Never just ignore any court summons you receive, even if you know the statute of limitations on a debt has expired. Ignoring a lawsuit can result in a judgment against you and a debt collector may be able to collect funds from you. Consult a lawyer immediately and show up to all scheduled court dates. Providing a validating document or proof of the last time you paid a debt that shows it is in a time-barred status can often result in the case being dismissed.

Expert Recommendations:

Michael Rapp of the Consumer Legal Clinic said debtors should know a lawyer might not be as expensive as they think:

“In many cases, Consumer Protection Lawyers won’t charge you money to take your case.  Consumer protection laws have what are called ‘fee shifting provisions’ in them.  It means that the company that is violating your rights has to pay your lawyer.  Effectively making your representation free.  The laws provide not only for the consumer’s legal fees, but stiff penalties for debt collectors that don’t follow the law.  Those penalties are paid to the consumer.  So for example, if a debt collector sends a consumer a letter or calls them trying to get them to pay a debt they don’t owe, the consumer may be entitled to $1000.  If it screws up their credit report, that is even more money.”

Robert Lax, an attorney at Lax LLP, had this to say:

“After the request for validation is made, the collector may not take further action to collect the debt until the validation information is provided.  Additionally, the consumer’s written response to the collector may also state that he or she disputes the debt.  A consumer may assert a dispute to the debt over the phone, but it is better practice to do so in writing. This dispute must be noted by the collector if the debt is reported to a credit bureau.  Once the validation information and original creditor identity is established, the consumer should be in a good position to assess the legitimacy of the asserted debt, including whether the statute of limitations may have run.  It is a violation of the FDCPA to attempt to collect a debt that is over the statute of limitations.  A consumer can in any case demand that the collector cease calling them, or direct communications only to their attorney—the demand should done in writing—and a debt collector not honoring such a demand would violate the FDCPA.”

Ines Mato, public relations and social media coordinator for Consolidated Credit Counseling Services, had this recommendation:

“If you are not aware of your debt, the first step is to check if you have debts in the three credit agencies (Experian, TransUnion and Equifax). Don’t start asking questions to debt collectors or assuming they are correct. If you keep talking to them, they may try to intimidate you or convince you to pay. If debt collectors keep contacting you, the second step would be to ask them to send you proof of your debts in writing.”

 

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