There have recently been numerous reports of people being contacted and threatened over past debts–that they didn’t actually legally owe. Collectors calling them day and night, using intimidating tactics and terms–all for a debt the person didn’t actually owe. It’s called “debt tagging”–they will call hundreds of people in a day in the hopes of finding a few who are scared or confused into paying a debt they don’t actually owe. It even happened to me–and we’ve lived a debt-free life for more than five years. According to the Federal Trade Commission (FTC), the government watchdog group that oversees these issues, scammers posing as debt collectors are on the rise. In fact, the FTC reports more complaints about debt collectors in general than any other industry they monitor. Even more, the number of complaints has quadrupled in the past five years.
I thought I’d go over the warning signs of scam debt collectors, along with the things that a debt collector cannot do under the Fair Debt Collection Practices Act (FDCPA). All of this information is available on the FTC website. If at any time you are contacted by a collector who violates the law or tries to collect a debt that you are not sure you actually owe, I would strongly suggest you review the FTC rules about fair practices, and follow some of the steps below to insure the validity of the debt.
- First, know your debt. Every year you are allowed to get one free copy of your credit report from the big three reporting agencies. I suggest requesting one copy every three months from one of the agencies, TransUnion, Equifax and Experian. This way you get a new one on a regular basis and are aware of what collection companies are seeing. Do not pay for a credit report, and do not give out your credit card number to obtain a “free” report. Access your reports for free using AnnualCreditReport.com. It is 100% free and was created by the credit reporting companies themselves.
- Understand the collection process of who will be collecting the debt:
- If it is a recent debt, within six months, chances are good that the company you owe the debt to will contact you directly for payment.
- If it is nine months to a year or older, typically a collection agency will contact you about the debt. It is possible that if the original company was unable to collect from you, they have written the debt off for tax purposes and ‘sold’ the debt to a new collection agency.
- If the debt is a few years old, most likely you are dealing with what is known as a “junk debt collector.” They buy up debts that were deemed uncollectable by other, larger agencies. There are reputable junk debt collectors, but these are the type of agencies most likely to be very aggressive in their tactics, as they are attempting to collect debts that no one else could collect. According to a 2010 report by the FTC: “Indeed, much purchased debt is resold one or more times as it moves through the debt collection system, often making it more difficult for consumers to recognize the debt being collected because the owner of the debt is not the original creditor.”
- Statue of Limitations:
- There is a statue of limitations to how long a debt can be required to be paid. Collectors can continue to contact you on these debts indefinitely and attempt to collect the debt, but they cannot sue you or garnish your wages after a certain date, depending on the type of debt and the state that you live in. This can vary so make sure you know the law in your area. In general, in many states, it is 5-6 years.
- The statue of limitations in general starts the date of your last payment. If your last payment was July 2011, then the statue of limitations expires in August 2016.
- According to the FTC report from July 2007: “Nearly all courts that have examined the propriety of suing or threatening to sue to collect on a debt that is older than the applicable statute of limitations have concluded that such practices violate the Federal Debt Collection Practices Act.”
- Warning sign #1: They call you and begin insinuating that they have already filed charges, even if this is the first you’ve ever heard of the debt. You must pay NOW or you will be arrested/property seized/wages garnished. This is often someone trying to scare you into paying something you may or may not actually owe.
- Warning sign #2: You have no idea what this debt is. Ask questions and immediately request proof of the debt. Many scam collectors will buy a list of debts, then look in the phone book and start calling people with the same name. I once was contacted for a debt from 1990 for someone with the same name as my eight year old son. He clearly wasn’t even born at that time!
- Warning sign #3: They use an obviously false name. I’ve heard of some using names like “Mr. Hooper” and “Fred G Sanford.”
- Warning sign #4: They refuse to send you anything in writing, insisting they have for months and it is too late–but you’ve not received anything.
- Warning sign #5: The debt amount that you “owe” is much, much more than anything you would have borrowed or legitimately owed. For example, a $100 debt now is $1300 to settle. There are legitimate legal fees and fines, but they often inflate these (which is also illegal) to increase their profits.
- Warning sign #6: They demand access to your checking account immediately. They ask for a check by phone or routing information. This gives them access to withdraw money from your account immediately.
- Warning sign #7: They’ve blocked their phone number or changed it to all zeros on the caller ID. When a legitimate collector calls, they should be able to provide you with a valid street address of their offices, a return phone number, and proof you owe the debt. If someone gives you an address that isn’t an actual street address, be wary.
- Warning sign #8: They call dozens of times within a few hours or one day. This is considered creating a “harassing” or “abusive” environment and is a frequent tactic to intimidate people into paying a debt right away for fear of embarassment–even if they don’t actually owe the debt.
Ten Basic Rules All Debt Collectors Must Follow:
- Identify that they are a debt collector and are attempting to collect a debt from the beginning of a call.
- Send you proof of the validity of the debt at the first contact, when you request it. ASK FOR THIS. This is not a copy of your credit report, nor is it simply a written statement from them that you owe this amount. They must show you proof of where the debt was accrued, where you agreed to it, and the history of the debt, upon request. Many ‘junk debt’ collectors do not have this information and will try to sidestep this and tell you it isn’t required. It is as long as you request it the first time they contact you.
- They may NOT disclose to others your debt, and they may not create an environment that harasses you by repeatedly calling multiple people and insinuating you have a debt.
- They may not tell you they have filed suit, have already begun the process of garnishing wages, seizing property, having papers served if they are not actually doing that. If they call and tell you a process server is looking for you, or that a sheriff will be delivering papers in the next 24 hours, they must have already filed the paperwork. These tactics are all designed to increase your sense of urgency in paying a debt lest you be “arrested.” This is important to note: wage garnishment and property seizure cannot happen unless a legal judgement has been made first–and that requires you be served with notice first by a court.
- This is my opinon and not legal fact, but it is derived after spending time working for both the BBB and a collection agency in college: if an agent calls you and tells you they’ve already filed papers to sue you or garnish your wages, then suddenly in the call give you the option to “hold” the papers until noon the next day? They’re lying. If they’ve already filed, they can’t “hold” anything.
- They cannot represent themselves as lawyers if they are not in fact, lawyers.
- Debt collectors cannot implicate or insinuate that you have committed some form of crime (unless you actually have, as in a bounced check) in order to disgrace you and intimidate you.
- Cannot threaten to take any legal action that they are not actualy entitled to take.
- They cannot contact you at inconvenient times or places, such as before 8 am or late at night. They also cannot contact you at work if they’re told that it isn’t allowed. Doesn’t matter if they are told orally or in writing–they must stop once you tell them not to contact you at work.
- May not use obscene or profane language, or any other form of abusive language.
- May not communicate via postcard or use language or symbols that communicates you owe a debt in a way that is clearly visible to others.
If you feel that these rules have been violated, I strongly encourage you to contact the FTC at 1-877-FTC-HELP. If a debt collector is found of violating these rules, you could be entitled to up to $1,000 per occurance in damages from the debt collector.
While I’ve done my best to verify all of the information here and to make sure that it accurately describes the law, it is important to remember that I am not a lawyer, simply a consumer advocate. Make sure to double-check everything before proceeding, and contact a lawyer if you are ever sued. Here’s some good sources for more information on what a debt collector is and isn’t allowed to do and common debt scams:
- Cornell Law School
- FTC Facts for Consumers on the Fair Debt Collection Practices Act
- FBI: debt scams use extortion tactics