Close-up: Debt Collector

Physician's Money Digest, February 2007, Volume 14, Issue 2

n.

Debt Collector: A person employed in the collections department ofan original creditor or a collection agency, who tracks down debtors andcompels them to pay what they owe.

The phrase "taking up a collection" usually conjuresimages of charity or thoughtfulness. It often refersto people contributing to a positive and welcomecause. The mention of debt collection, however, quicklydispels any positive sentiment and tends to send shiversrunning up and down a person's spine.

The unwelcome arrival of a debt collector at your dooris a serious and stressful matter. And, unfortunately, thistype of intrusion caused by neglected debt occurs morefrequently than most people realize.

We are a society of debtors. The Federal Reserve indicatesthat the average credit card debt for people whocarry a balance on their credit cards was $12,338 in 2004.Nearly half (ie, 46%) of US households carry a credit cardbalance. But more importantly, almost 10% of US householdshave debts that are overdue by 60 days or more.

Unfair Practices

Understanding how debt collectors work and knowingyour rights under the Fair Debt Collection Practices Act(FDCPA) are the first lines of defense. And "defense" is theoperative word here, because abusive, deceptive, and simplyunfair debt collection practices are widespread. But,many of these practices are also legal.

The Star-Telegram

For example, according to an article in the Texas newspaper, debt collectors can and do contactyour neighbors in an effort to track you down. This isperfectly legal as long as the collector adheres to the followingrequirements:

•Identifies themselves,

•States that they are seeking information to correct orconfirm the location of the consumer they are tracking,

•Identifies their employer, only if this information isexpressly requested,

•Refrains from stating that the consumer in questionowes any debt, and

•Does not contact a person more than once for informationon the consumer, unless otherwise requested bythe person.

Although the collector is unable to disclose any specificsto your neighbors about your debt, revealing their identityand/or their employer is more than enough to give yourneighbors a clear picture of your financial woes.

According to Fair-debt-collector.com, funds in yourbank account can also be seized or frozen by collectors.The Web site says, "If you owe creditors, collectors, or anyoneelse money, they can obtain a money judgment andhave the funds in your bank account frozen, or they canseize [the funds] outright." Courts can also order yourbank or employer to pay a specific portion of the moneyyou owe. This is referred to as a wage garnishment or agarnishment of your bank account.

Kiplinger's

And just because the original creditor you owe moneyto may have given up in their collection attempts, thatdoesn't mean you're off the hook. According to an articlein , agencies known as third-party collectorscan step in and attempt to collect on the debt. Sometimesthey work on a contingency basis, taking a percentage ofwhatever they collect, and sometimes they purchase thedebt outright. Once they own the debt, they have beenknown to press hard and often to get the money back.

Know Your Rights

Of course, not all debt collectionpractices are legal.Debt collectors often demandpayments on debts you maynot be able to afford. Theyhave been known to harassconsumers over debts thathave already been paid, or worse, debts they have notincurred. As mentioned earlier, that's where the FDCPA,passed by Congress in 1977, comes into play.

The FDCPA is designed to help consumers fight back.And the best way to fight back is to know your rightsunder the law. For example, you probably didn't know thatmost debts expire. Checking your state's statute of limitationson debt collection could save you a lot of time,money, and grief. You should also regularly check yourcredit reports. Doing so could lead to the discovery of amystery debt that you canclear up before it falls into thehands of an aggressive debtcollector.

In addition, if you find yourselfin the position of havingto dispute a debt, you mustnotify the collection agency inwriting that the debt is beingdisputed. Failure to do so opens the door for debt collectorsto demand payment or take legal action immediately.

Debt collectors can be relentless; it is part of their job.You can learn more about your rights by visiting Fair-debt-collector.com.

Know Your Collector

What's in a name? Plenty, especially when itcomes to debt collection. The Fair Debt CollectionPractices Act (FDCPA) defines a debt collector asany person who regularly collects, or attempts tocollect, consumer debts for another person orinstitution. As such, it's important to recognizethat there are many instances when an institutionis not a debt collector under the FDCPA. Thisincludes situations where an institution collects:

•Another's debts in isolated instances,

•Its own debts under its own name,

•Debts it originated and then sold, but continuesto service, such as a mortgage or student loan,

•Debts that were not in default when theywere obtained, and

•Debts that were obtained as security for acommercial credit transaction.

Understanding the difference between a truedebt collector and a person collecting money isimportant in terms of knowing your legal rightsas a consumer. The FDCPA, for example, only coversyour rights with regard to interaction with adebt collector.

POPQUIZ

1) What percentage of US households carries a creditcard balance?

  1. 42%
  2. 46%
  3. 48%
  4. 50%

2) Debt collectors can contact your neighbor to trackyou down.

  1. True
  2. False

3) The Fair Debt Collection Practices Act was passed inwhat year?

  1. 1970
  2. 1975
  3. 1977
  4. 1979

4) Funds in your bank account cannot be seized or frozen by debtcollectors.

  1. True
  2. False

5) There is a statute of limitations on most debts.

  1. True
  2. False

Answers: 1) b; 2) a; 3) c; 4) b; 5) a.