When you owe money on a debt, the lender usually works directly with you for payments and servicing unless you fall significantly behind. Sometime between 3-6 months past due, the lender will contract with a debt collection firm to collect the money for them. At some point the original lender will write off the amount of the loan as uncollectible, indicating that they’ve given up on collecting and will sell it off to a different debt collector for whatever they can get, often as low as 5-10 cents for every dollar owed. In this case, the debt is still technically owed but the ownership of the debt has changed hands and transferred the legal obligation to a different party than the original lender.
Regardless of who owns the debt, it remains in force and accumulating interest until the statute of limitations in your state runs out which can be from 3-15 years from the time the account first went delinquent. During that period of time, it can be sold to one debt collector after another and each will attempt to collect the money. Debt collectors are nothing if not persistent, so this can add up to a lot of calls over time. How can you handle it? Start by knowing your rights under the Fair Debt Collection Practices Act (FDCPA).
What are your rights under the FDCPA?
- You can only be contacted between the reasonable hours of 8:00 am and 9:00 pm.
- Collector must verify your debt within 30 days if you request verification
- Must not contact you if your request in writing. At that point they can only contact you to confirm receipt of your request or if they are filing a lawsuit.
Certain collection activities are specifically prohibited under FDCPA:
- Collectors cannot harass you by using profane language or making threats
- Collectors cannot make false statements and claim to be police or claim that you’ve committed a crime
- Collectors cannot invade your privacy or speak to anyone else about your debt. They may contact friends or employer to locate you.
- Collectors may not contact you at work if you request in writing that they cease.
Points to consider:
- Double check that it is your debt, that it’s owned by the collector, and that the statute of limitations has not run out.
- Remember that the collector probably bought your debt for less than 5% of the balance owed and that anything collected above that amount is profit. Don’t be afraid to negotiate hard with them—you’re not taking food off his plate.
- Don’t agree to any payment amount or payment plan that you can’t afford. If you agree to new terms, but don’t uphold your side of the bargain, the full amount of the debt remains in-force.
- Make sure you get any agreement in writing (or email) before sending payment. If your collector tries to do an immediate payment by getting your bank account number by phone, insist that you get the documentation on the agreement first.
- Contact your state Attorney General if your collector violates the FDCPA. Often this is enough to get them to stop offensive practices.