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If I Pay a Small Amount on My Debt, Can I Still be Sent to Collections? - The Bills.com Blog
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If I Pay a Small Amount on My Debt, Can I Still be Sent to Collections?
Tuesday, Oct 20, 2009
Question: If I pay an amount on my credit card every month (it is currently 45 days late), can its collections department still call me about the debt?
Answer: The original creditor has the right to call you about the debt any time a contractual installment is late. If you are in arrears on your payments you can expect the internal collections department to call to see why you haven't brought the account up-to-date.However, most major card companies will refrain from sending the account to outside collections (to avoid the cost to them) for at least three months, but more often, five or six months in arrears.
Common non-law, legal urban myths
Your question brings up a phenomenon I see often in the consumer finance theater, "the common non-law."
I can’t tell you the number of times I have been told, "The creditor can't do anything if you make a payment every month on the debt." The rule is stated as if the amount is not really important so long as something is paid each and every month. This rule is nonsense and has no basis in law.
Another commonly held non-law is that if a defendant in a civil suit avoids service of process the plaintiff is totally stymied and cannot proceed. Again, this is nonsense.
Why are these misconceptions so commonly and widely held? I believe the first non-law grew out of the Great Depression when an Alabama lawyer began negotiating much reduced debt payments for his clients who had theretofore been assiduous in their debt payments, but could no longer pay those aggregate amounts each month. A private plan of repayment called for extremely reduced payments, and the creditor agreed not to seize property, garnish wages, and so on if the debtor made monthly payments. In very poor months the debtor could pay in the amount of his best effort, but he had to pay every month.
From the creditor's point of view, half the collection battle would be won if they could get debtors into a payment routine or, rather, rut. If
creditors were not to be paid substantially in bad months, at least they could salvage some benefit from this repayment plan. After the plan was agreed to between the debtor and each creditor it could truly be said, "pay what you can -- if you can't make the full payment, pay something each month and the creditor can't do anything to you."
These repayment plans spread throughout the country and became very popular. Instead of getting nothing, creditors were getting something. Years later this grass-roots semi-solution became the conceptual basis for Congress' amendments to the Bankruptcy Act when it introduced the unprecedented type of bankruptcy known as a Wage-Earner's Repayment Plan, or Chapter XIII (13)-- with strong support from the creditors and bankers.
Collections laws today
So, we can start with the fact that creditors have a conditional right to contact you in the regular collections manner simply because the account is in arrears. But for other regulatory regimes, you will be contacted by an internal collector to pressure payment from you.
However other regulatory regimes exist at the federal and state levels. All regulatory schemes exist by governmental action, but none are private (that I know of) by, say, trade association rules or other private means. Most states do not have a comprehensive regulatory scheme, only a collection of prohibitions against collectors resulting from ad hoc abuses and the regulations passed in response to such abuses. These collector statutes usually came about when some especially egregious act by a rogue collector resulted
These repayment plans spread throughout the country and became very popular. Instead of getting nothing, creditors were getting something. Years later this grass-roots semi-solution became the conceptual basis for Congress' amendments to the Bankruptcy Act when it introduced the unprecedented type of bankruptcy known as a Wage-Earner's Repayment Plan, or Chapter XIII (13)-- with strong support from the creditors and bankers.
Collections laws today
So, we can start with the fact that creditors have a conditional right to contact you in the regular collections manner simply because the account is in arrears. But for other regulatory regimes, you will be contacted by an internal collector to pressure payment from you.
However other regulatory regimes exist at the federal and state levels. All regulatory schemes exist by governmental action, but none are private (that I know of) by, say, trade association rules or other private means. Most states do not have a comprehensive regulatory scheme, only a collection of prohibitions against collectors resulting from ad hoc abuses and the regulations passed in response to such abuses. These collector statutes usually came about when some especially egregious act by a rogue collector resulted
in specific consumer injury, giving collection methods an exceedingly unfavorable press.
Other states, such as California, simply incorporated the federal statute into the state law in its entirety. California made one huge addition to federal law by providing that the restrictions on consumer contact apply equally to original creditors. The federal statute known as the Fair Debt Collections Practices Act (FDCPA) applies only to third-party collectors, so it would not keep your creditors from contacting you. (See Collections Advice to learn more about the collections process.)
Recommended course of action
Contact a well-connected organization, the National Association of Consumer Advocates (NACA). This is an association of lawyers across the country who practice consumer protection law. NACA has developed a network that should provide a referral for you to an experienced attorney in your state who can speak with you and definitively answer any questions you might have regarding this debt.
Most initial consultations are provided free of charge. Specifically, you should ask the attorney if there are any laws or regulations in your state that could prevent collection activity in your situation, and if making small payments each month extends any degree of protection. A wide ranging discussion should help you plan ahead knowing all of your alternatives.
For more information about consumer debt, and the various options that may be able to help resolve it, I encourage you to visit the Bills.com debt help page. I wish you the best of luck and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Other states, such as California, simply incorporated the federal statute into the state law in its entirety. California made one huge addition to federal law by providing that the restrictions on consumer contact apply equally to original creditors. The federal statute known as the Fair Debt Collections Practices Act (FDCPA) applies only to third-party collectors, so it would not keep your creditors from contacting you. (See Collections Advice to learn more about the collections process.)
Recommended course of action
Contact a well-connected organization, the National Association of Consumer Advocates (NACA). This is an association of lawyers across the country who practice consumer protection law. NACA has developed a network that should provide a referral for you to an experienced attorney in your state who can speak with you and definitively answer any questions you might have regarding this debt.
Most initial consultations are provided free of charge. Specifically, you should ask the attorney if there are any laws or regulations in your state that could prevent collection activity in your situation, and if making small payments each month extends any degree of protection. A wide ranging discussion should help you plan ahead knowing all of your alternatives.
For more information about consumer debt, and the various options that may be able to help resolve it, I encourage you to visit the Bills.com debt help page. I wish you the best of luck and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Lucy on Thursday 22nd October 2009 16:51
Received a call today from a collection agency saying they are about to submit my paper's to court. For a credit card debt they say is $6,000. I've never owned a credit card for more than $500. I cancelled the card about 8 years ago, didn't finished paying balance and haven't paid. They say I am being sued for above amount. What do I do? Help I live in CA.
2. Posted by Bill on Thursday 22nd October 2009 18:49
If the facts in your question are accurate, almost certainly the statute of limitation has expired on the debt. See Charge Off, Credit Report, Statute of Limitations & Merged Creditors and Collections Advice for additional explanation on this concept. I suggest you send the collection agent a cease communication letter, a sample of which can be found in the Bills.com debt self-help center. Remember, a collection agent is not your attorney. Legal advice provided by an collection agents is usually incomplete or wrong, and is always self-serving.
3. Posted by Opal Hodge on Saturday 14th November 2009 15:32
I live in Michigan. I am 69 years on a fixed income that is insufficient for my everyday expenses. I have two active judgements filed against me one 2007 and 2008. I have old credit card debt from 2003, 2005, and I receive 10-12 collections calls a day that is affecting my health. My State income check has been taken and my bank account attached, within out notification to me putting me $150 in the negative. I don't have enough to survive, is there anything I can do.Thank you for being here...I was going to send them $5 a month, but you said that won't help(:
4. Posted by Bill on Saturday 14th November 2009 16:05
You mentioned you are on a "fixed income," that you are 69 years old, and that you receive a "state income" check, so I will assume that you are receiving a pension or Social Security retirement benefits. If this is the case, and your retirement benefits are your only income, the creditors cannot levy the contents of your bank account. You need to contact your bank and tell them to make a notation on the account that your pension or social security benefits are deposited into that this account contains only funds from those sources, and may not be levied. I urge you to contact the county bar association and ask them for the name of the organization in your area that provides legal services to low- and no-income people. Make an appointment with an attorney or paralegal in that organization and bring all of the letters and other documents regarding your debts and the money seized from your account. Ask the attorney or paralegal if you are "judgment proof" and what steps you can take in your state to prevent future collection actions, including cease-communication letters.
5. Posted by Kathy on Monday 16th November 2009 09:19
My situation is this - I have a small business that needs revolving credit. I own 3 properties which are either upside down or wouldn't sell because of where they are (depressed area) or the many other properties for sale aren't selling. My problem is I am $103,000 in credit card debt. I have been able to pay all my bills and the minimums on the CC's. This changes this month, because the cards are maxed because they lowered my limits. I have called credit counseling. They couldn't get me the rates I have now (they are really low). The consolidation would cost me more than I can pay now. I can afford to pay everything but the credit cards. My FICO has taken a hit because of the high balances and debt to credit limits but it's still around 700.Should I default or do I have another option?Please advise.
6. Posted by Bill on Monday 16th November 2009 12:26
Please see What Are My Debt Resolution Options? for a comparison and contrast of your options. I would put default out of your mind as a viable long-term strategy.