Debt collection

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It goes without saying that none of us wants to hear from a debt collector. While once largely the province of organized crime, debt collection has attempted to go somewhat legit. This is not to say that today's collection agencies don't resort to strong-arm tactics, including harassing phone calls and threats that are often illegal. Given the complexity of debt collection laws and regulations that vary state to state, there are hundreds of ways a debt collector can engage in illegal practices, including but certainly not limited to harassment. The key is to know your basic rights, and to record abusive and illegal practices. In many cases, your debt can be erased (due to collection agency misconduct) or reduced. In some cases, you might even have the right to sue for damages.

Collection agencies are counting on you to not do your homework. They are counting on you to be an easy mark and to be overwhelmed by Kafkaesque bureaucracy, harassment and shame. Our current economic downturn only amplifies the problem. Everyone has less money and more debt. Debt collectors themselves are making less money and this is a recipe for more aggressive and increasingly illegal tactics. Even if the collection agency does not engage in activities and techniques that are technically illegal, they are likely to use intentionally obfuscating tactics. If this sounds like the kind of thing that we're all used to from credit card fine print and gym membership terms, that's because it is. While this chapter can't tell you everything you need to know to handle your specific situation, it can provide a basic outline and point you to resources that can help beat the system that wants you to fail.


A collection agency often works on behalf of an original creditor (OC). An OC can be a department store, a credit card company or a rent-to-own furniture shop, just to name a few common examples-basically wherever you took out a credit card or loan. When bills go unpaid, the OC contracts with collection agencies or third-party debt collectors to collect the debt. In many cases the collection agency simply takes a commission of every debt it collects on behalf of the OC. Another likely scenario is that the collection agency has bought your debt outright from the original creditor, such as a credit card company after a period of non-payment. Many banks are required by law to charge off unpaid debts after a designated period of delinquency. The original creditor may sell your debt to a collection agency, but the collection agency doesn't pay full price. In fact, it will almost certainly pay much less, usually 2%-25% of the debt's face value. So if you owe $1,000, the collection agency might pay $150 for the right to collect that $1,000 from you. The credit card company may also claim your debt and all the interest and fees you have accrued as a write-off in its financial filings.

In short, the collection agency is essentially buying the right to take a gamble on your debt, debt that the OC may have already charged off. But they aren't just buying your debt. They are buying debts of hundreds, even thousands, of people like you. For their gamble to pay off, they only need to convince enough debtors-through legal means or otherwise-that we must pay them. The collection agency might also tack on additional late fees and interest all while harassing you by phone and by mail to collect.


It is key to understand how collection agencies think if you want to know how to best engage with them.1 First, it is usually pointless to go back and contact the original creditor. The original creditor almost certainly has an agreement with the collection agency that prevents them from negotiating directly with you.

Collection agents often receive little training beyond, "Here's your desk, your phone and computer-now go make some money." Many collection agency workers' pay is tied to a monthly quota of how many debts they can collect and it is common for collectors to employ more aggressive and illegal tactics toward the end of the month. Because they work on monthly commission, collection agency workers are also most likely to pursue the people with the largest debts and the people who seem most likely to pay.

It is important to remember that you are the most important variable to a collection agent. To quote one message board familiar with their tactics, "It is your fears, your fantasies, your partial understanding of the truth that empowers the debt collector and each of these is a weapon to be used against you. By carefully stating half-truths and letting your imagination run away . . . "

It is also important to note that there are two common types of collection agencies: letter writers and just plain "collection agencies." Letter writers basically just write letters directing you back to the original creditor to make your payment. Collection agencies require you to pay them directly, often so they can be assured they will get their commission from the OC. Either way, they must include a mini-Miranda in their letters or read it during their phone calls. If they do not, you may have grounds to sue.

If your first contact with a collection agency is over the phone, the mini-Miranda warning should sound something like this: "Hello, I am [name of collector]. I am [or "this office is"] a debt collector representing [creditor]. Information obtained during the course of this call will be used for the purpose of collecting the debt."

If your first contact with the collection agency is via mail, the mini-Miranda should look something like this: "This correspondence is an attempt to collect a debt. Any information obtained will be used for that purpose. Unless within 30 days of your receipt of this notice, you notify us that you dispute the validity of this debt, it will be assumed to be correct. If you notify this office within thirty days that you dispute the validity of the debt, we will obtain verification of the debt or a copy of the judgment. If you request it within 30 days, we will provide you with the name and address of the original creditor (if different from the current creditor)."

Do not ignore the call or letter. The biggest mistake people make when they get a letter or call from a debt collection agency is to ignore them and hope they will go away. Because you have 30 days to contest the debt, you must act immediately. If you ignore the contact, you are by default agreeing that the debt is legitimate.

Whether the debt is legitimate or not: o Write a letter to the office of the collection agency or attorney and state that you (a) dispute the bill; and that (b) you want a full accounting of the monies claimed to be owed. The Fair Debt Collections Practices Act of 1996 (FDCPA) requires they contact the original creditor to secure full account detail. Without a confirmed accounting of this debt, they cannot return to the collection process.2 o In responding to a call, advise the collector that you (a) are disputing the debt and that you are doing so in writing to his/her offices; and that (b) you do not want to receive a call from this agency at your place of work and that they can only contact at your home (or on your cell phone if you don't have a home telephone) between the hours of X and Y. There is a decent chance that you may not hear back. Remember, the collection agency is most likely to pursue the people they think are most likely to pay. You may have to continue to write to them, and even threaten to sue. (See Appendix D for sample letters.)


In every state there is a statute of limitations (SOL) for outstanding debts-a limit on the number of years in which a creditor may attempt to pursue payment. Each state is different so you should check.3 Some states, like Kentucky and Ohio, have extremely long periods (fifteen years for written debt agreements) while states like Mississippi and North Carolina have much shorter periods (three years for written debt agreements). If there is a dispute about which state's laws apply, you can be assured that the collection agency will argue for the state with the longer period.

When does the SOL clock start?

The SOL clock starts running on the date of the last activity of your account. This is often the date of your last payment but-and this is key-it may also be the date when you entered into a payment agreement or simply acknowledged liability for the debt. This is why it is key to always contest liability. If your debt is beyond the SOL you can contest the debt on these grounds and, should you want to play offense, you can also attempt to set up the collection agency for a FDCPA violation and hit them with a suit.


Even if your debt falls within the SOL, there is a good chance the debt collector will engage in abusive or deceptive practices that are illegal under the FDCPA, but it is up to you to know your rights, be vigilant and document any violations. Violations are grounds for dismissing debt and related lawsuits.

Some common FDCPA violations

There are countless ways to violate the FDCPA and the longer you engage with your debt collector or agency (while continuing to dispute the debt-this is very important), the greater the chance you will catch them in the act. Unfortunately (or fortunately if you are a debt collector) only a small fraction of violations go reported. You do not need a lawyer to contest debt obligations or report FDCPA violations; you can take action on your own and even win damages.

Due to an absence of regulations and enforcement, debt collectors routinely break the law, verbally abuse and threaten debtors. These practices are rampant in an industry that is run like the Wild West. Here are just some of the very dirty tricks that debt collectors use:

Recently debt collectors have "embedded" themselves in hospitals-like reporters in a war zone-coordinating with hospital staff to make bedside visits. While patients are often at their most vulnerable, sick or injured and naked except for a hospital gown, these debt collectors will attempt to shake them down for money. Jessica Silver-Greenberg writes, "To patients, the debt collectors may look indistinguishable from hospital employees, may demand they pay outstanding bills and may discourage them from seeking emergency care at all, even using scripts like those in collection boiler rooms."[4]

It is common for debt collectors to call pretending to be police officers and claim that they have a warrant to arrest a debtor if they don't pay up. Debt collectors will often continually harass people for debts they don't owe or have already paid or for those that have already been dismissed in court. Collectors frequently target the wrong person, mistaking one person for someone else with the same or similar name. Debt collectors will lie and say that they are calling on behalf of debt relief agencies, learn all about a debtor's situation and collect all of their personal information, and then use it against them. Collectors have been known to illegally call employers and inform them of employees' debts. In the most extreme cases, debt collectors have made disturbing threats to seriously harm debtors and their families.[5] Although illegal, these tactics are rampant.

Even debt collectors who follow the law can legally mislead you or trick you in other ways. Credit card companies have started data-mining cardholder's purchases and using software to create psychological profiles of them. These profiles are then used by debt collectors to psychologically manipulate debtors to pay more than they otherwise would have to, including artificial late fees that would otherwise have been waived. This tactic, although manipulative and immoral, is completely legal. After using a psychological profile to swindle one debtor out of an additional $2,000, debt collector Rudy Santana explained, "It's all about getting inside their heads and understanding what they need to hear."[6]


With all of this in mind, it's important to know what debt collectors legally can and can't do. Below is a basic list to help protect you: o A debt collector can only call a third party once about you unless it believes the third party gave it false information the first time. o Contacting you before 8:00 AM or after 9:00 PM is illegal. o You must tell a collector not to contact you at work by sending them a cease and desist letter (see Appendix D, sample letter #2). You must send this certified mail and keep a copy for yourself so you have proof of receipt. If the collection agency contacts you again, other than to advise you of their intent to take action, then they are violating the FDCPA. o Under no circumstances does a default on a car loan equal theft. It can not be reported to law enforcement. Legal repossession is the creditor's right. o If you do not want to be in contact with a debt collector, then that's your right. It doesn't cancel the debt but it is your right not to speak with debt collectors. o A debt collector cannot sell a debt to another collection agency with full knowledge that it has expired (see SOL) or is in dispute. o A debt collector may try to lead you to believe that you have no grounds for requesting a validation of debt (see Appendix D, sample letter #2). o A debt collector may try to represent themselves as an attorney or law firm even if they are actually not an attorney or law firm. Regardless, it is important to remember that collection attorneys also have to follow the FDCPA just like collection agencies. o If a debt collector sends an initial notice advising you of your right to a validation of debt, then they cannot demand payment within the next thirty days. o A collector cannot call your job and tell your HR department that they need your work information (wages, schedule) unless a valid suit was filed by them and tried in a court of law with a judgment in their favor. Until this happens (if it happens), they cannot contact your HR department or place of work, even if they claim to be looking for information to sue you. o It is not unheard of for debt collectors to use fake case numbers and fake lawyers to scare an alleged debtor into paying. Of course, this is in clear violation of the FDCPA. o Regardless of whether the initial contact is via mail or letter, the collector must provide you with a mini-Miranda (see above). The mini-Miranda should also be on each and every communication you get from a debt collector. o A collector is not allowed to reveal information about the envelope's contents on the outside of the envelope for others to see. Words such as "past due" or "collections" are in clear violation of the FDCPA. o A debt collector cannot impersonate a law officer or claim they can throw you in jail for not paying your alleged debt.


There are two main ways to fight back against debt collectors: letter writing and lawsuits for violating the FDCPA. Both could be made into mass actions that attempt to overwhelm debt collectors while also helping us reduce our debts. With the right organizational structure, debtors being chased by a common debt collector or debt collection agency can coordinate a well-timed, well-thought-out letter writing campaign. If many debts with the same collector are disputed, it will clearly disrupt and possibly halt their business. As far as we know, this has never been tried. If a collector violates the FDCPA (which won't be hard to find out), a class-action lawsuit could be organized. As usual, we recommend you consult a lawyer before considering this.



Carreon and Associates ( The Consumerist ( Debtorboards ( Fighting Collection Agency Debt ( National Consumer Law Center ( Written Off America (


Jude Chao, "How to Report Collection Agency Abuse," eHow ( "Debt Collection FAQS: A Guide for Consumers," National Association of Consumer Advocates ( "Debt Collection Info Packet," NEDAP, 2006 ( Alex Henderson, "'Am I Going to Have to Kill You?': The Horrific Ways Abusive Debt Collectors Threaten and Harass Their Victims," AlterNet, April 17, 2011 ( Lynnette Khalfani-Cox, "How to Handle Rude and Abusive Debt Collectors," AARP, January 16, 2012 ( "Know Your Rights When You Owe a Debt," National Association of Consumer Advocates ( Patrick Lunsford, "Debt Collectors Pursuing More than 14 Percent of Americans," Inside ARM, February 29, 2012 ( Chris Morran, "Debt Collectors Real & Fake: Top List of Most-Blocked Phone Numbers," The Consumerist, August 6, 2012 ( Chris Morran, "4 Things Debt Collectors Won't Tell You," The Consumerist, October 18, 2011 ( "Predatory Lending Practices," National Association of Consumer Advocates ( Yves Smith, "How to Beat Vulture Debt Collectors," Naked Capitalism, August 16, 2012 (


1. "The Psychology of Collections," Professional Recovery Personnel, Inc. ( 2. "Debt Settlement Letters and Sample Letters on Debt and Credit," Debt Consolidation Care ( 3. LaToya Irby, "State-by-State List of Statute of Limitations on Debt," ( 4. Jessica Silver-Greenberg, "Debt Collector is Faulted for Tough Tactics in Hospital," New York Times, April 24, 2012 ( 5. "As a Result of FTC Action, Two Defendants in Abusive Debt Collection Case are Banned from the Industry, Will Surrender Assets," Federal Trade Commission, March 15, 2012 ( 6. Charles Duhigg, "What Does Your Credit-Card Company Know About You?" New York Times, May 12, 2009 (