The last year was a struggle for many Americans, as a global pandemic led to businesses closing their doors, widespread job loss, and a plummeting economy. Despite stimulus checks, assistance programs, and loan and mortgage forbearance options, your finances may be struggling to rebound. When you start receiving collection calls or your mailbox begins to fill with collection letters, you may wonder about the legitimacy of the debt collector and the legality of their collection efforts.
Here, we discuss debt collection: what is a debt collector; what can a debt collector do; and what are your options when a debt collector violates your rights.
What is a debt collector?
A debt collector is responsible for recovering money owed to a creditor on a delinquent account. A creditor is a direct source of borrowed funds, either by credit card, loan, or other means. A debt collector may be a creditor, but it is typically a third-party hired to collect a debt on the creditor’s behalf.
A debt collector can be a collection agency or a debt buyer who purchases the debt from the original creditor outright which then gives the debt buyer the exclusive right to collect on the debt. Unlike a collection agency that might profit a percentage of the amount recovered from the consumer on the original creditor’s behalf, a debt buyer owns the account and is therefore entitled to keep the full amount recovered, if any, from the consumer.
Debt collectors are efficient and effective at persuading consumers to repay the money owed on a delinquent account. Whether the debt collector is a collection agency collecting on behalf of the original creditor or a third-party debt buyer collecting on their own behalf, it is in the debt collector’s best interest to recover as much money as possible from the consumer because the amount of money collected determines how much the debt collector profits. Therefore, debt collectors have a reputation for being stern, coercive, and intimidating as they must convince consumers to repay the money that the original creditors were unable to convince them to pay.
If the original creditor has not already sold the account at a loss to a debt buyer, they may decide to do so when a collection agency is unsuccessful in collecting the debt. This allows the original creditor to make some money but allows a windfall profit to the debt buyer should they subsequently be successful in recovering the balance from the consumer. When continued collection efforts remain unsuccessful, the original creditor or debt buyer who now owns the account may initiate a collection lawsuit, suing the consumer for the unpaid funds. The intent behind the lawsuit is to obtain a judgment that will provide the creditor with the authority to collect the debt from the consumer, even if the consumer is unwilling or unable to tender payment on his or her own.
What can a debt collector do?
Debt collectors act as the original creditor’s agent and therefore have the authority to attempt to collect the debt from the consumer. Common practices include sending strongly worded letters and making frequent phone calls to the consumer to persuade the consumer to pay the money they owe. When the debt collector is unable to reach the consumer, the Internet and private investigators may be used to track them down.
Debt collectors may also research what kind of assets the consumer has. Delinquent accounts can be reported to credit bureaus by the debt collector as a tactic to compel payment. Unpaid balances and late payments can negatively impact a consumer’s credit score which is sometimes a significant factor in encouraging consumers to resolve the issue to preserve their credit score.
Sometimes, debt collectors are also used post-judgment. A judgment grants the creditor, debt buyer, or collection agency the authority to collect the debt by garnishing the consumer’s wages, levying bank accounts, or even seizing personal property. Consumers can be very clever in handling their money and transferring their property to avoid these collection actions. Therefore, collection agencies may be hired to track down where the consumer’s assets are and how the creditor can access them to collect on the judgment.
What is a debt collector not allowed to do?
Though a debt collector can research what assets the consumer has and even obtain general information about the consumer’s bank and brokerage accounts, debt collectors do not have any actual authority to use this information to forcibly collect on the debt through a bank levy or wage garnishment unless a judgment has been granted. Therefore, unless the collection agency has the right to bring a lawsuit against the consumer, files the claim timely, and is awarded a judgment on the matter, the debt collector may not do anything with the information other than collect it and provide it to the original creditor.
There are federal, state, and local laws that apply to the practice of debt collection which places strict limitations on how debt collectors interact with consumers. The Federal Trade Commission (FTC) regulates debt collection through laws like the Fair Debt Collection Practices Act (FDCPA) to ensure consumers are treated fairly and protected from harassment, threats, deception, and discrimination.
When a debt collector contacts you about a delinquent account, you have the right to request verification of the debt. Once you make your request in writing, the collector must cease collection efforts until verification of how much you owe, whom you owe it, and how to pay is provided. If the debt collector is unable to provide these details, collection efforts must stop completely.
Debt collectors are also supposed to validate the debt within five days of first contacting the consumer to collect the debt. Like verification, a debt validation must be detailed. Debt validation establishes the collector’s right to collect on the debt, which is especially important when a debt buyer is involved.
While debt collectors love to report unpaid accounts to credit reporting agencies to entice repayment, the law prohibits debt collectors from reporting a debt that is more than seven years old. Further and perhaps most importantly, the law prohibits debt collectors from harassing, threatening, deceptive, or discriminatory behavior as a tactic to collect a debt. There are also time constraints to when a debt collector can contact consumers, to prevent late-night calls or further nuisance.
If a debt collector is violating your rights, you have options
You can file a complaint with your state’s Attorney General, report the collector to the FTC, or you may have a defense to a related collection lawsuit. To ensure your rights are protected, contact an experienced consumer litigation attorney for more information.
