Ward Off Predatory Debt Collectors

7 ways individuals can protect themselves from predatory debt collectors

SAN MATEO, Calif., Oct. 31, 2007 - This Halloween, one of the scariest prospects that faces individuals is the specter of a debt collector terrorizing them -- calling at home, at work, late at night, at friends' houses, and perhaps all to haunt consumers for a debt that they do not owe, that is more than they owe, or that fell by the wayside a decade ago. But consumers can drive a stake through the heart of shady debt collectors by knowing and acting on their rights, according to Andrew Housser, co-founder and co-CEO of free online consumer portal Bills.com.

Since 1977, the United States has enforced the Fair Debt Collection Practices Act (FDCPA) to protect consumers from shady debt collection tactics. In fact, abusive techniques have served as one key factor that recently led the U.S. House of Representatives to end private collection of U.S. tax debts.

"Every year, the U.S. Better Business Bureaus (BBB) and the Federal Trade Commission rank the worst industries by number of consumer complaints received, and debt collectors always make the cut," noted Housser. "For 2005, collection agencies ranked No. 6 on the BBB's list -- with more complaints than banks, phone companies, credit card issuers and auto repair businesses. The matter has become so bad that on Oct. 10, the U.S. House of Representatives passed a bill to end private collection of U.S. tax debts, citing the abusive tactics collectors sometimes use and the fact that government employees will be both less expensive and easier to rein in."

According to the National Consumer Law Center, 97 to 98 percent of consumers pay bills on time. But those among the 2 percent to 3 percent who fall behind -- or people wrongly accused of owing payments -- can suffer from constant calls from debt collectors. When debt collectors are calling, Housser suggests consumers be aware of the following seven steps to protect themselves:

  1. Learn the rules - Understand the legal limits of debt collection. The FTC enforces the FDCPA. Housser summarizes the rule as saying that debt collectors cannot harass or threaten consumers, make false statements, invade debtors' privacy or lie.
  2. Watch for fraud - "If the collector is asking about a debt that is more than five or 10 years old, or one that sounds absolutely unfamiliar, be cautious," Housser warned. Do not provide personal information. Do not send money or offer details about bank accounts or credit card numbers. Request written proof of the debt. "If it is a very old debt, check your state's statute of limitations to make sure the debt is enforceable," Housser added.
  3. Fight invalid claims - If a collector demands payment of a debt an individual does not owe, or more than they owe, they can dispute the debt in writing. The formal terms are "debt verification" or "debt validation." Within five days of first contacting the consumer, debt collectors are required to notify the individual of his or her right to validate the debt. Consumers are required to write to request verification within 30 days of when they are first informed of the debt. Sending the request by certified mail is wise.
  4. Keep good records - Keep copies of all collections-related correspondence. "Pay debts only after receiving written notice of the amount due, and keep records of all payments," Housser said.
  5. Choose communication routes - Debt collectors may not force consumers to respond immediately. "If they catch you off-guard, ask them to call you back in an hour so you can collect your thoughts and plan," Housser suggested. "If they call at work or a relative's home, tell them you formally request they not call you there. You also can write to formally request they cease and desist from contacting you, although this does NOT eliminate any debt you owe. But be forewarned that this strategy may lead a collector to escalate collections by suing or sending the debt to a law firm."
  6. Report violations - If you believe a debt collector is breaking the law, you can report the collections agency to the Federal Trade Commission and your state Attorney General's office.
  7. Get help - Reputable debt resolution specialists -- such as Bills.com -- can provide resources, education and tools to understand your financial situation. They also can put you in touch with providers to help if you are struggling with debt resolution - and help reduce the hassles and pressure of debt collectors.
  8. "It's very important to know your rights so debt collectors cannot intimidate you," Housser said. "Standing up for yourself will not eliminate your debt -- but it will give you the opportunity to handle it fairly and without unnecessary suffering."

Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at /. Since 2002, Bills.com has served more than 30,000 customers nationwide while managing more than $500 million in consumer debt. Bills.com is a division of Freedom Financial Network, LLC, whose co-founders and CEOs, Andrew Housser and Brad Stroh, have been named Northern California finalists in Ernst & Young's Entrepreneur of the Year Awards.