Debt collectors must follow the rules

Posted on Mon, Jun. 05, 2006

Debt collectors must follow the rules

If you've ever been delinquent on a debt, you know just how persistent and savvy debt collectors can be and how many ways they can get to you. Most, but not all, of them are legal, and knowing the difference will protect you from being taken advantage of.

More than a quarter of all consumer complaints to the Federal Trade Commission in 2005 concerned debt collectors, both in-house and third-party. Third-party agencies alone accounted for more than 66,000 reports of abuse.

So what constitutes illegal collection practices?

Debt collectors must:

Indicate, within five days of first contacting you, who they are, for whom they are collecting and how much you owe.

Not call before 8 a.m. or after 9 p.m., unless you say they can.

Only contact third parties, such as family members, once and only in an attempt to locate you.
Not call your workplace if they have reason to believe it will put your job in jeopardy.

Not threaten you with actions they cannot take -- criminal prosecution or garnishment, for example -- or will not take, such as a civil lawsuit.

Nearly half the FTC complaints regarding collection agencies concerned demands for more money than was owed, which is against the law.

So what can you do if you're being harassed or suspect foul play?

Start by writing a letter, says John Ventura, director of the Texas Consumer Complaints Center at the University of Houston Law School. Ask the agency to verify how much you owe and to stop any practices you find offensive, such as repeated calls to your office or family members. Keep a copy of the letter.

You can also tell a collection agency to stop contacting you entirely -- a "cease communication" letter. But that is effectively saying you won't pay the debt and will force the creditor to decide whether or not to take you to court.

If an agency is breaking the rules, register a complaint with the state attorney general's office or by calling the FTC's hotline at 877-FTC-HELP. See the FTC's guidelines for consumers at www.ftc.gov/bcp/conline/pubs/credit/fdc.htm.

-- MarketWatch.com