Consumer Protections

The Federal Fair Debt Collection Practices Act (FDCPA) was designed to eliminate abusive, deceptive, and unfair debt collection practices. The Federal Trade Commission (FTC) enforces the FDCPA.

Under the FDCPA, a “debt collector” is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them. The FDCPA applies to consumer debts (personal, family, and household debts) but does not apply to business debts (debts incurred to run a business).

The FDCPA requires a debt collector to identify themselves and notify you in every communication that they are a debt collector, give the name and address of the original creditor upon your written request, notify you of your right to dispute the debt in part or in full with the debt collector, and provide you with notice of your right to dispute the debt. They must also provide verification if you send a written dispute or request for verification within 30 days after receiving the debt collector’s 1692g notice. The debt collector must either then mail the consumer the requested information (e.g. the name and address of the original creditor, the contract you signed with the original creditor, the amount of debt owed, accounting statements), or cease collection activity all together. The debt collector may not contact you again until they have provided verification of debt.

Under the FDCPA, the following conduct is prohibited by the collector:

• Contacting debtor by telephone outside the hours of 8 am to 9 pm local time.
• Causing a telephone to ring continuously or engaging the debtor in telephone conversation repeatedly or continuously;
• Communicating with debtor at their place of business after notification that it is unacceptable;
• Attempting to collect the debt by misrepresentation or deceit, including the debt collector pretending to be an attorney, a government agent, or a law enforcement official;
• Threatening arrest or legal action that is not permitted or actually contemplated, falsely claiming that you have committed a crime, and/or that you will be arrested or have a warrant out for your arrest (in general, you cannot be criminally arrested for debt owed).
• Using abusive or profane language;
• Communicating or discussing the nature of the debts with third parties (including co-workers or neighbors)

Requesting a Cease and Desist
Under FDCPA, a debt collector is required to cease communication with you in any way, upon your written request that you wish to receive no further communication regarding the debt, or that you refuse to pay the debt. Upon receiving a cease and desist notification from you, a debt collector may still report a valid debt to your credit report and may sue you in civil court to enforce the debt.

To file a complaint about a debt collector, contact the Federal Trade Commission by visiting their website.

If you have old debts, debt collectors may not be able to sue you to collect on them. That is because debt collectors have a limited number of years, known as the “statute of limitations,” to sue you to collect. After that, your unpaid debts are considered “time barred.” According to the law, a debt collector cannot sue you for not paying a debt that is time barred.  

In general, a debt collector or creditor must sue you in court within 6 years after your last payment on the debt, or your acknowledgment of the debt, and reduce the claim to a judgment in order to collect against you on the debt.  

Acknowledgement of the debt re-starts the 6-year statute of limitations from the date of acknowledgment. Acknowledgment of the debt can be as simple as admitting that you owe the debt over the phone, asking for more time to pay the debt, etc.  

Payment on the debt restarts the 6-year statute of limitations from the date of payment. If you make a payment on the debt at any time (even 10 years later), the 6-year statute of limitations resets and starts again.  

This does not mean that a debt collector will not attempt to sue you for collection. A debt collector or creditor starts a lawsuit by having you served with a summons and complaint (note: a lawsuit is NOT started by the debt collector or creditor filing the summons and complaint in court). It is your responsibility to respond by having an answer served on the debt collector or creditor (generally within 20 days of being served with the summons and complaint), asserting the statute of limitations as an affirmative defense, and to appear in court if you are given a hearing date. If you do not respond to a summons and complaint, or appear in court, the court may enter a “default judgment” against you, even if the statute of limitations has passed.  

A judgement allows the debt collector or creditor to pursue enforcement against you, including an automatic lien on your real property, wage garnishment, bank account levy, etc. 

Please note that relying on that statute of limitations to get out of your debt obligations is very risky. The creditor, collection agency, or its attorney can sue you in court for collection on the debt at any point within the statute of limitations, and in general the uncollected debt can be reported on your credit report for 7 years (judgements can be reported until they expire, e.g. 10 years; student loan debt and tax debt can be reported until 7 years after they have been paid off in full). The practical effect is that your credit can be ruined and it can be very difficult for you to obtain financing that you may otherwise need. 

You should be extremely cautious about using a for-profit company that provides debt settlement, tax settlement, or debt management services. Some companies in these industries have had numerous complaints from consumers for charging high fees while providing little to no service or debt relief.

To help curb abuse in the debt settlement/debt negotiation industries, most states have passed very stringent laws requiring registration as a debt settlement or debt management organization and adherence to organization that is not properly licensed under these laws. You can check to see if a company is licensed by visiting your state’s license lookup site, or by calling the Department of Commerce in your state.

In short, these laws provide that debt services companies are required to, among other things:

• Provide a debt services agreement, in writing, signed by the debtor, with a copy given to the debtor
• Provide conspicuously in agreement whether or not the debt services company is licensed and registered
• Inform the debtor, in writing, that debt settlement is not appropriate for all debtors and that there are other ways to deal with debt, including using credit counseling or debt management services, or filing bankruptcy;
• Prepare in writing, and provide to the debtor, an individualized financial analysis of the debtor’s financial circumstances, including income and liabilities, and make a determination supported by the individualized financial analysis that:
  • The debt settlement plan proposed for addressing the debt is suitable for the individual debtor;
  • The debtor can reasonably meet the requirements of the proposed debt settlement plan; and
    Based on the totality of the circumstances, there is a net tangible benefit to the debtor of entering into the proposed debt settlement services plan;
  • Provide, on a document separate from any other document, the total amount and an itemization of fees, including any origination fees, monthly fees, and settlement fees reasonably anticipated to be paid by the debtor over the term of the agreement;
  • Provide a prominent statement describing the terms upon which the debtor may cancel the contract;
  • Provide a detailed description of all services to be performed by the debt settlement services provider for the debtor;
  • Provide the debt settlement services provider’s refund policy

These laws also provide that companies are prohibited from, among other things:

• Charging up-front fees without first performing a service;
• Promising, guaranteeing, or inferring that any debt will be settled, prior to presenting a settlement offer to your creditors;
• Telling consumers to stop paying their creditors;
• Advising consumers that entering into a service agreement with the company will stop interest, fees, collection activities, lawsuits or garnishments;
• Advising consumers that entering into a service agreement will improve their credit score;
• Falsely representing that the debt settler can negotiate better settlement terms than a debtor could on their own.

The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies (i.e. your credit report). There are 3 major consumer reporting agencies (Equifax, Experian, and Transunion).

A summary of your rights under the FCRA is as follows:

• You must be told if information in your file has been used against you. Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance or employment—or to take another adverse action against you—must tell you and must give you the name, address, and phone number of the agency that provided the information.
• You have the right to know what is in your file. You may request and obtain all information about you in the files of a consumer reporting agency (your “file disclosure”). In many cases, the disclosure will be free. All consumers are entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.
• Additionally, you are entitled to a free disclosure if: a person has taken adverse action against you because of information on your report, you are the victim of identity theft, your file contains inaccurate information as a result of fraud, or you are on public assistance.
• You have the right to dispute incomplete or inaccurate information. If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous. See more for an explanation on credit report dispute procedures.
• Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. Corrections usually need to be made within 30 days.
• Consumer reporting agencies may not report outdated negative information. In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.
• You must give your consent for reports to be provided to employers. A consumer reporting agency may not give out information about you to your employer or a potential employer without your written consent given to the employer.
• You may seek damages from violators. If a consumer reporting agency, user of consumer reports, or furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.

The FTC has published a guide for correcting mistakes on your credit report. It can be found here.