With the economy still climbing out of recession and unemployment hovering near 9%, a lot of folks are behind on their payments. They owe money to banks for auto loans, hospitals for medical bills, and credit card issuers for everything from electronics to clothing to home appliances.
This mountain of unpaid debt has provided a wonderful business opportunity for debt collectors. Typically, credit card issuers will attempt to collect late payments for about six months. After that, they may outsource their collection activities to an agency or law firm that specializes in tracking down past-due accounts. If those parties are unsuccessful, the card issuer may write off the debt and sell it to a third party known as a “scavenger debt collector.”
These scavenger collectors typically pay 3¢ to 10¢ for each dollar of debt. Say, for example, you owe $1,000 to a credit card company. A scavenger agency might buy that debt for $60, then try to collect the entire outstanding balance. If successful, the return for these firms can be phenomenal: $1,000 (often plus interest and fees) for a $60 investment. Of course, most old debts are difficult or impossible to collect. That’s why such companies can purchase the debt so cheaply.
If debt collectors are pressuring you, know your rights. The Fair Debt Collection Practices Act (FDCPA) offers specific protections to consumers. For example, you have the right to ask a collector for written proof of the debt he’s trying to collect. You’re also allowed to dispute a debt you don’t think you owe, as long as you put your dispute in writing within 30 days of being contacted.
The FDCPA also places certain restrictions on the practices of debt collectors. They can’t contact you before 8 a.m. or after 9 p.m. (unless you agree), they can’t call you at work if they know your employer disapproves, and they can’t falsely imply that they’re attorneys or government representatives. Debt collectors are also barred from using profane language or harassing you by repeated telephone calls. They can’t threaten you with consequences that aren’t legal, falsely imply that you’ve committed a crime, misrepresent the amount of your debt, or state that you’ll be arrested if you don’t pay.
For more information about your consumer rights and debt collection laws, contact www.ftc.gov or your state’s attorney general.