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Rules Rein in Debt Collectors to Protect Consumers

March 3, 2015
Credit Card Basics, Credit Cards
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In honor of National Consumer Protection Week, the Nerds want to educate you on your rights as a consumer. Today, we’ll explain the Fair Debt Collection Practices Act, what debt collectors can and can’t legally do, and where you can report any bad behavior from collection agencies.

Few things are more frustrating than being harassed by debt collectors for debts you want to pay off, but can’t. But federal rules protect you from inappropriate and deceptive collection practices. Read on to learn more about your rights as a consumer when you have an account in collections.


The Fair Debt Collection Practices Act is an amendment to the Consumer Credit Protection Act created to protect consumers from abusive debt collection practices. It defines consumers’ rights when dealing with collection agencies and limits the actions debt collectors can take.

What debt collectors can do

When your debt is past due, your lender may sell it to a collection agency. Debt collectors from the agency can then attempt to collect the debt you owe, typically through letters and phone calls. If the contact is legitimate, a collector should be able to provide you the name, address and phone number of the collection agency when asked.

A collection agency has the right to call you at your home or workplace within reasonable hours unless it is specifically asked not to do so. Within five days of calling you, a collection agency is required to send you a written validation notice stating the amount you owe and the name of your creditor.

If you don’t think you owe the debt, you can send the agency a letter explaining this within 30 days of receiving the validation notice, according to the Federal Trade Commission. With the letter, include any proof that the debt is not yours. The collection agency must cease contacting you at this time, unless it can send you written verification that the debt is yours.

If the debt is yours and you want the agency to stop contacting you, you can send a letter requesting that. After your letter has been received, there are two circumstances in which you may still be contacted:

  • The collector may contact you to let you know there will be no further contact.
  • The collector may contact you to let you know that there will be specific action — like a lawsuit — taken against you.

Nerd tip: Make copies of any correspondence you send to and receive from the collection agency in case you have to take legal action or legal action is taken against you.

Speaking of lawsuits, a collection agency can typically sue you to collect a debt if you don’t pay within a certain time period. If you lose, the collector can get a garnishment order against you and take the funds out of your bank account. You may also have a portion of your wages garnished. Make sure to respond to any court summons you receive; otherwise you forfeit your right to fight a garnishment.

Debt collectors can contact third parties for the purposes of getting your address, phone number or the name of your workplace. Generally, third parties may be contacted only once each.

» MORE: What the Credit Card Act means for consumers

What debt collectors can’t do

Debt collectors can’t contact you during unreasonable hours, generally before 8 a.m. or after 9 p.m. They also have to cease calling you at your workplace if you tell them in writing or over the phone that you can’t accept calls there.

A debt collector may not harass you about a debt. Threats of violence and obscene language are considered harassment, as is publishing your name publicly because you owe a debt or annoying you with multiple phone calls.

A debt collector may not engage in unfair collection practices, such as trying to collect more than you owe, depositing a post-dated check early or taking your property when not legally allowed to do so.

If a collection agency has more than one of your debts, it can’t apply payments you make to one debt to another. It also can’t apply payments to a debt you say you don’t owe.

A debt collector can’t lie to you to collect the money you owe. This includes falsely representing himself as an attorney, government representative, or anyone else; stating that you’ve committed a crime; stating that you owe more than you do; or misrepresenting the legality of the forms you’re sent. Debt collectors can’t say that legal action or wage garnishment will occur if that’s not true. They also can’t give false credit information about you to anyone or falsify the name of the agency they work for.

If you have an attorney representing you, the collection agency has to talk to your attorney, not you. As a general rule, a debt collector can’t discuss your debt with anyone besides you, your spouse and your attorney. But as stated above, third parties may be contacted once each to obtain location information about you.

Nerd note: Your state may have additional debt collection rules. For more information, contact your state’s attorney general.

What you can do if a debt collector breaks the rules

If you feel that a debt collector has violated these rules, you should report these instances to the Consumer Financial Protection Bureau, the Federal Trade Commission and your state attorney general’s office.

You can sue a collection agency within a year of any violation of your consumer rights. If you win, you may be able to collect monetary compensation for court costs, attorney fees and any applicable damages, according to Nolo. You may also be entitled to up to $1,000 in statutory damages from the collector, even if there is no apparent damage other than the law violation. If you join a group of people suing a collector in a class action lawsuit, the group may receive damages of up to $500,000 or 1% of the collector’s net worth, whichever is lower.

Nerd note: Even if you successfully sue a collector for illegal collection practices and win your lawsuit, you still owe any debt that is rightfully yours.

Bottom line: The FDCPA outlines what debt collectors can and can’t do in an attempt to collect a debt. Know your rights and report any inappropriate or illegal behavior to the FTC, CFPB and your state attorney general’s office.

Erin El Issa is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @Erin_Lindsay17 and on Google+.

Image via iStock.