It can be frustrating and scary to fall behind in payments on your credit card or other accounts. When the calls from collection agencies start, it adds a new level of stress. Don’t panic. Take a deep breath, learn about what collection agencies can and can’t do, and work to resolve your issues.
The first thing you need to know is that there are rules in place to protect you.
In the United States
The Federal Trade Commission (FTC) enforces the Fair Debt Collection Practices Act (FDCPA) in the United States. The FDCPA prohibits debt collectors from using abusive, unfair, or deceptive practices when trying to collect on your debts.
The FDCPA considers anyone who regularly collects debts owed to others as a debt collector. This means collection agencies, lawyers who collect debts, and companies that buy debts and then try to collect them are all covered.
The FDCPA applies to personal, family, and household debts, including money you owe on credit cards, auto loans, medical bills, and your mortgage. It does not apply to debts incurred running a business.
When a debt collector calls, they must follow up within five days with a written “validation notice.” This notice must spell out the name of the creditor you owe money to, how much you owe, and how to proceed if you think you don’t owe the money. You may want to talk to the debt collector at least once to see if you can resolve the issue, but if you decide you do not want the collector to contact you again, document it in writing. Sending a letter does not resolve the debt and will not stop action to collect the debt, but it can affect how the collector communicates with you. If an attorney is representing you regarding the debt, the debt collector must deal with the attorney instead of with you.
The Consumer Financial Protection Bureau (CFPB) has action letters you can use when writing to debt collectors. You can tell the collector to limit or stop contact with you, get more information about the claim, dispute the debt (within 30 days of the validation notice), or tell the collector that you have hired a lawyer. You can find the templates here.
Send your letter by certified mail with a return receipt to confirm the debt collector received it. Also keep a copy of your letter for your records. Once the collector receives your letter they will need to stop contacting you. The exceptions to this are contacting you to let you know there will be no more contact and contacting you to let you know about taking a specific action (like filing a lawsuit). They can also contact you again to send you written verification of a debt you say you do not owe.
What Collectors CAN and CANNOT Do:
CAN contact you by phone, letter, email, or text message, as long as they identify themselves as debt collectors
CANNOT pretend to be someone else, like a government agency or credit reporting company, or use a false company name
CAN contact you at work unless you tell them you are not allowed to get calls there
CANNOT call before 8:00 AM or after 9:00 PM (unless you agree to it)
CAN contact other people about you to find out your address, phone number and place of employment but CANNOT contact them more than once or discuss your debt with them (except for your spouse or your attorney).
The FDCPA goes into detail about more practices that are off limits for debt collectors, including harassment, false statements, and unfair practices. Some specific things they cannot do include:
- Use threats of violence or harm or use obscene or profane language
- Publish a list of names of people who don’t pay their debts
- Falsely claim you have committed a crime
- Misrepresent the amount of money you owe
- Lie about whether or not the papers they send you are legal forms or give you something that looks like an official document if it isn’t
- Tell you that you will be arrested if you don’t pay your debt or say they will seize, garnish, attach, or sell your property unless they are permitted by law to do so
- Threaten you with legal action if doing so would be illegal or if they don’t intend to actually do it
- Try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt – or your state law – permits the charge
- Deposit a post-dated check early
- Contact you by postcard or any other means that can outwardly be identified as coming from a debt collector
In Canada, collection agencies are under the purview of the provinces and territories. Rules vary across Canada but the Federal-Provincial-Territorial Consumer Measures Committee states that generally collection agencies are forbidden from:
- Trying to collect a debt without first notifying you in writing or making a reasonable attempt to do so.
- Recommending or starting legal or court action to collect a debt without first notifying you.
- Communicating with you or your family such that the communication amounts to harassment, or calling to collect a debt at certain prohibited times (which vary from one province or territory to another).
- Implying or giving false or misleading information to anyone.
- Communicating or attempting to communicate with you without identifying themselves, saying who is owed the money and stating the amount owed.
- Continuing to demand payment from a person who claims not to owe the money, unless the agency first takes all reasonable steps to ensure that the person does, in fact, owe the money.
- Contacting your friends, employer, relatives or neighbours for information, other than to get your telephone number or address. An exception would be if any of these people have guaranteed the debt or if you have asked the agency to contact them to discuss the debt or, in the case of your employer, to confirm your employment, your job title and your work address.
When you are dealing with a collection agency
Keep track of all the calls you receive from a collection agency and save all written statements. Do not give out personal or financial information until you have confirmed that the collection agency is legitimate. If you can work out a deal to pay monthly or reduce your owed debt, get the details in writing. When you pay off your debt, make sure you get and save documentation of the resolved debt.
What should you do if a debt collect sues you?
Do not ignore a lawsuit summons. A debt collector can sue you to collect a debt and a court judgement can result in third parties like your bank or employer turning over funds to pay your debt. If you do not show up in court, you are losing your chance to fight garnishment. Make sure you or your lawyer respond to a lawsuit by the date in the court papers.
What should you do if a debt collector violates the law?
If you think a debt collector has broken the law in their dealings with you, you have a year from the violation to sue. Remember that even if the debt collector violates the law, a legitimate debt does not go away.
You can file complaints and reviews of collection agencies at bbb.org.
There are also government agencies you can go to for help:
In the United States, your state Attorney General’s office, the FTC, the CFPB can help. Many states have their own debt collection laws and your Attorney General’s office can help you understand them.
In Canada, contact your provincial or territorial consumer affairs office.
Last Reviewed: April 28, 2017