| DEBT COLLECTION AND THE LAW
Q. What can happen to me when I don't pay a debt?
A. As noted earlier, creditors are very likely to report your
delinquencies to one or more credit
bureaus, thus harming your credit record. In many states they may seek
a judgment and court
order to garnish your wages; that is, an order to your employer to pay
directly to the credit
grantor some portion of your wages. Federal law sets a limit on what portion
may be taken, and many state laws are even more protective. But if you
have a good income, the probability is that some of it is subject to garnishment.
You will always have a chance to appear in court to defend yourself before
the
garnishment is approved. If the garnishment is approved, the creditor
will then notify your
employer to subtract a given amount from your paycheck each payday and
pay that amount to
the creditor until the debt is satisfied. Your employer may not fire you
because of the
garnishment.
For a car, truck, home appliance or other durable good purchased on credit,
your creditor
probably has a lien on the item that you purchased. Having a lien means
that, if you fail to pay as agreed, the creditor may recover (repossess)
the item that you purchased with credit. Many state laws require that
the creditor notify you, say two weeks in advance, of its intent to repossess
so that you may have a last chance to pay your outstanding debt on the
item. The creditor may not breach the peace when repossessing your car.
For example, he may not seize it by force or break into your garage to
seize the car.
Remember, most agreements specify that when you are in default, the entire
debt, not
just the monthly payment, is immediately due. Nor does repossession of
your car, for example,
end your obligation to the creditor. If your unpaid balance and accumulated,
unpaid finance
charges, plus the creditor's costs of repossessing the car, are more than
the net amount that the
creditor obtains from the sale of the car, you are still legally liable
to the creditor for the
shortage. If the creditor thinks that you may be able to pay something
towards the shortage, the
creditor can ask a court to assess a deficiency judgment against you for
the shortage. A few state laws prevent deficiency judgments in some cases,
but you should not count on being able to avoid this problem.
Q. Who is a debt collector?
A. Under the federal Fair Debt Collection Practices Act (FDCPA),
a debt collector is someone, other than a creditor, who regularly collects
debts for others. This federal law does not cover creditors, although
your state laws in many cases may govern them. Thus, a retailer who attempts
to collect unpaid debts owed to it would not be covered by the FDCPA,
but may be covered by the laws of the state where the delinquent consumer
resides. These laws usually are similar to the federal Fair Debt Collection
Practices Act. The rest of this section is based on the federal act.
Q. How may a debt collector contact me?
A. A debt collector may contact you by mail, in person, or by
telephone or telegram during
convenient hours. Unless you agree in writing (or a court specifically
grants permission), a
collector may not contact you at inconvenient or unusual times or places.
Examples of poorly
chosen times are before 8:00 A M. or after 9:00 P.M. Also, a debt collector
is not permitted to
contact you at work if the collector knows or has reason to know that
your employer forbids
employees from being contacted by collectors at the workplace. You can
tell the debt collector
what times and places are inconvenient for you to receive calls.
Also, a debt collector is forbidden from contacting you if he or she knows
that you are
represented by a lawyer.
Q. How can I stop a debt collector from contacting me?
A. By notifying a debt collector by mail not to contact you.
After that, the attempts at contact
must stop. There are two exceptions to this. The debt collector may tell
you that there will be no more contact, and that some specific legal or
other action may be or will be taken. However, debt collectors may state
this only if they actually plan to take such action.
Debt collectors also must stop trying to contact you if you notify them,
by mail within
thirty days after they first contact you, that you dispute all or part
of the debt or that you are
requesting the name and address of the original creditor. However, debt
collectors are permitted to begin collection activities again if they
send you proof of the debt, such as a copy of the bill, or the information
you requested about the original creditor.
Q. What does the law require the debt collector to tell me about
my debt?
A. Within five days of your first contact, a debt collector must
send you a written notice stating:
• the name of the credit grantor to whom you owe the money;
• the amount of money you owe;
• that the debt collector will assume the debt is genuine unless
you challenge all or part of it
within thirty days, and what to do if you believe you do not owe the money;
• that if you ask for it, the debt collector will tell you the name
and address of the original
creditor, if different from the current creditor.
Q. Whom may a collector contact about my debt?
A. A debt collector may contact any person to locate you. However,
in doing so, the collector
usually may not talk to anyone more than once or refer to the debt when
talking to that person. If debt collectors use the mail to contact you
or another person, they may not send letters in
envelopes identifying themselves as bill collectors. They also may not
send a postcard. Once
collectors know that you have hired a lawyer, they may communicate only
with your lawyer.
Q. What types of debt collection practices does the law prohibit?
A. A debt collector may not harass, oppress, or abuse any person.
For example, a debt collector may not:
• use threats of violence to harm you, your property, or reputation;
• use obscene or profane language;
• repeatedly use the telephone to annoy you;
• make you accept collect calls or pay for telegrams; or
• publish a "shame list" or other roster of individuals
who allegedly refuse to pay their debts
(though the debt collector can still report you to a credit bureau).
A debt collector may not use false statements when trying to collect a
debt. For example, a
debt collector may not:
• misrepresent the amount of the debt;
• falsely imply that the debt collector is a lawyer;
• tell you that your property or wages will be seized, garnished,
attached, or sold, unless the
debt collector or the credit grantor intends to do so and it is legal.
Q. What may I do if the debt collector breaks the law?
A. If the collection effort is being made by a credit grantor
(for example, a retailer or bank),
check with the consumer protection office of your state attorney general's
office and write that
office a letter detailing your complaint (with a copy to the offending
credit grantor). If the
collection effort is from an independent debt collector, write the nearest
office of the Federal
Trade Commission or the office in Washington, D.C. The FTC has been active
in pursuing violators and may fine them heavily or even put them out of
business.
In addition, if debt collectors violate the Fair Debt Collection Practices
Act, you may sue
them in a state or federal court. However, you may do so only within one
year from the date they violated the law. You may recover money for the
actual damage you suffered. In addition, the court may award up to one
thousand dollars for each violation for an individual suit and as much
as five hundred thousand dollars in a class action suit. (The latter is
a suit brought by a group of people who claim that the illegal debt collection
practice injured all of them. In other words, it injured them as a class.)
You also may recover court costs and attorneys' fees. However, consumers
found acting in bad faith against a debt collector may have to pay for
court costs.
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