If you or someone you know has dealt with a collection agency, you know how trying it can be. Debt collection agencies have a long history of harassment and illegal practices. Can a collection agency report to a credit bureau without notifying you? The answer might not be that simple. Knowing illegal debt collection practices can help identify when you’re being treated unfairly.
The Law Protects You
The Fair Debt Collection Practices Act is a federal law that protects consumers against certain unfair collection practices. It applies to only external or third-party debt collectors and only for personal debts. It does not come into play for creditors collecting their own debts. State laws may provide additional protection.
In its annual report to Congress about debt collection complaints, the Consumer Financial Protection Bureau described collection complaints received by the Federal Trade Commission (FTC).
In 2019, the FTC received 75,200 complaints about debt collectors—down from 84,500 in 2018. A complaint does not mean a law has been broken, and some complaints may result from overseas debt collection scammers who harass consumers.
If the FTC finds the complaint to be valid, the agency can ban parties from participating in debt collection. The FTC keeps an up-to-date list of all prohibited parties.
A collection account can significantly affect credit score. If you’ve been contacted by a collector and are worried your credit is being hurt, it might be a good idea to check your credit scores to see if anything has changed.
FTC 2019 Annual Report: Types of Debt Collection Complaints Reported by Consumers
Every year the FTC releases a report discussing the six main types of debt collection complaints from consumers. Understanding these complaints gives you a better idea of your rights as a consumer. If you’ve experienced any of these types of actions from a debt collection agency, you can report them to the FTC.
Before we delve in, a quick note: keep in mind that state laws can vary. So whenever we mention the law, we’re specifically referring to the Fair Debt Collection Practices Act (FDCPA).
1. Attempts to Collect a Debt Not Owed
Percentage of complaints: 45% in 2019
The law: If you don’t think the debt belongs to you, you can send a request in writing within 30 days of receiving the initial notice that you want verification of the debt. You can also request that the debt collector no longer contact you. You may consider making the request in writing so you have proof of the request
Often, this issue arises after identity theft occurs. That’s why it’s essential to keep an eye on your credit report, so you can spot these issues early.
2. Failure to Provide Written Notification of Debt
Percentage of complaints: 18% in 2019
The law: Within five days of initially contacting you, the collector must send written notice of the debt and include:
- The amount of the debt
- The name of the original creditor to whom the debt is owed
- A statement describing your right to dispute the debt
You can file a complaint with the FTC if you believe the debt collector never sent written notice. Most individuals complaining about written notifications (65%) say they didn’t receive adequate information to identify and confirm their ownership of the debt. Additionally, some individuals (30%) complain that their written notice never included their right to dispute the debt.
3. Communication Tactics
Percentage of complaints: 12% in 2019
The law: Collectors are not allowed to call repeatedly just to harass you. However, there is no specific number of calls specified in the FDCPA limiting calls they can make within a given period. That’s for the courts to decide. If you think a debt collector is calling too often, start keeping a record of the time of the call and any messages left. Collectors also may not call before 8 a.m. or after 9 p.m. unless you’ve given them permission or at times you’ve told them are inconvenient.
The majority of complaints surrounding communication tactics are about repeated phone calls (55%), foul or abusive language (12%) or calls outside of the allotted times (5%).
4. Negative or Legal Action, or Threats of It
Percentage of complaints: 12% in 2019
The law: Collectors can’t threaten a lawsuit, criminal prosecution, wage garnishment, jail time, or a poor credit rating unless they have the legal authority to do so and intend to do so.
The most common complaints in this category in 2019were:
- Threats or suggestions that a consumer’s credit history would be damaged (34%)
- Threats to sue on old debt (28%)
- Threats to arrest or jail consumers for not paying the debt (14%)
- Lawsuits without proper notification (9%)
- Attempts or successful seizures of property (8%)
- Attempts or successful collection of exempt funds, such as unemployment benefits or child support (5%)
- Lawsuits filed in a different state from where the consumer signed the contract or currently lives (2%)
- Threats of turning the consumer in to immigration officials or of deportation (0.2%)
These threats are often in violation of the FDCPA. Usually, collectors must take you to court and win before they can take these kinds of actions—if they even have the right in the first place.
5. False Statements or Representations
Percentage of complaints: 11% in 2019
The law: Collectors can’t use false statements or representations to try to force consumers to cooperate, including:
- Claiming to be affiliated with the U.S. government or any state
- Purporting to be a law enforcement official or an attorney
- Stating that failure to pay will result in imprisonment, seizure of property, garnishment of wages, or other false claims
- Implying the consumer committed a crime
These claims are in violation of the FDCPA to make if they are untrue. Sometimes, collectors may be allowed to make a claim if they have taken the consumer to court and received a court-approved judgment.
In 2019, the majority of complaints in this category were for:
- Attempts to collect the wrong amount (74%)
- Impersonations of an attorney, law enforcement official, or government official (17%)
- False statements that the consumer committed a crime by not paying the debt (6%)
- Suggestions that the consumer should not respond to a lawsuit (3%)
6. Threats to Contact Someone or Share Information Improperly
Percentage of complaints: 3% in 2019
The law: Collectors can call third parties such as family members, neighbors, friends, or co-workers only once to locate the debtor. When they do, they are not allowed to reveal the debt.. They can only make contact again under specific circumstances.
In 2019, the majority of complaints in this category were for debt collectors who contacted:
- A third party about the debt (53%)
- An employer (28%)
- The consumer after being asked not to do so (18%)
- The consumer directly when they were informed to speak with only the consumer’s attorney (2%)
Debt Collection Laws
The federal Fair Debt Collection Practices Act (FDCPA) limits what debt collectors can do and say when attempting to collect a debt. This law covers mortgages, credit cards, medical debts, and any other debt for personal, family, or household purposes.
Unfortunately, the FDCPA doesn’t cover business debt or debt that is owed to the original creditor rather than a collection agency.
As stated earlier, time and place, harassment, and representation are all factored into this federal act. Debt collectors cannot contact you in an unusual place or at a time they know is inconvenient.
Additionally, if collectors are aware you have sought legal representation for the matter, they must immediately stop direct communication with you and, instead, contact your attorney, except for a few exceptions.
Can a Debt Transfer Hands?
Many people ask, “If a debt is sold to another company do I have to pay?” Once your debt is transferred, you owe the money to the current company rather than the original creditor. However, the new collector must still adhere to all the regular debt collection laws. In addition, the company cannot add interest you didn’t agree to or change any other terms of your original contract.
So, when does this happen? Can collection agencies buy from other collection agencies? Yes. Once your debt crosses a threshold that indicates it’s less likely to be paid, your original creditor will send it to a collection agency. After some time, the collection agency might sell your debt to a debt buyer.
If you do choose to pay off your debt, always make sure you pay the party currently holding your debt.
The Fair Credit Reporting Act
Another federal law is the Fair Credit Reporting Act. It covers certain financial aspects, including debt being collected and reported on your credit report.
This law protects consumers from unfair, deceptive, or abusive acts or practices by collection agencies or creditors.
How to Get Help
If you think a debt collector or collection agency has broken the law while trying to collect a debt, you can:
- Complain to the Consumer Financial Protection Bureau and your state attorney general
- Contact a consumer law attorney — you might be entitled to damages and/or attorney’s fees
Whenever you’re dealing with debt, it’s smart to review your credit reports for accuracy, because errors can unnecessarily damage your credit standing. Should the worst case happen, there are ways to dispute credit report errors.
If you’re ready to improve your credit score, you can begin the process of credit repair. Debt sent to a collections agency doesn’t have to ruin your financial life—you can work to fix your credit report with credit repair. ExtraCredit is offering an exclusive discount to one of the leaders in credit repair, so sign up today.