Debt collection agencies have a bad rap for a reason – most of them have absolutely no regard for consumer rights, are abusive to consumers, and screw up consumers’ credit.  However, there are some important legal loopholes that protect consumers’ rights.  As an ex-employee of one of the largest collection agencies in the world, I got to see the down and dirty business of the collection companies’ practices.  Instead of working the floor harassing debtors, I was in the Compliance Resolution department writing form letters to consumers.  My entire department revolves around keeping the company from getting fined too badly per the Fair Debt Collection Practice Act (FDCPA) and the Fair Credit Reporting Act (FCRA), two federally mandated acts that protect consumer rights and give you control of your debts.

When bloodsuckers come calling...

Firstly, it is always better to work directly with the company that you owe than it is to work with the collection company. This is true for a few reasons: The older the outstanding balance, the more likely the crediting company would want to settle for a lower amount. I’ve seen creditors settle for 35% of the original balance, just glad to get something out of the debtor.  Secondly, if you have to have a black mark on your credit report, it would be much better to have a delinquent status from the creditor as opposed to the collections company. The whole point of collection companies is to work accounts either on the behalf of the creditor (meaning attempting to collect the debt) or to buy up the debt (at a fraction of the outstanding balance) and collect on their own.  In my opinion, because of all the numerous errors in credit reporting and posting payments, it is reasonably dangerous to do business with collection companies. I have seen more than one payment get lost, misplaced to the wrong account, or credit reporting not being updated after the account is paid up. I have my own theories as to why there are so many errors in collection companies, mostly having to do with abhorrent business practices and treatment of employees, but bashing company policy is not the point of this article…maybe in a follow-up article. 😉

So, say you get a phone call from a collection company, demanding payment for a debt that you either do or do not know about.  What rights do you have as an American consumer? Per the FCDPA, any collection company who attempts to collect on a debt must validate the debt upon request. Validation can be anything from a set of Macy’s statements, a doctor’s bill, or a cable company who “forgot” to disenroll you from the 30 free days of cable program and charged you an arm and a leg for the free service.  Most importantly, the FDCPA has a cease and desist clause.  If the consumer states either in writing or verbally, “Do not call me or contact me regarding this debt,” the collection company is not allowed to continue to collect on the debt until validation has been sent to the consumer.

In addition to the FDCPA, the FCRA works to get collection companies off of your credit report.  According to the FCRA, continued reporting to the credit bureaus regarding this debt is considered to be actively collecting on a debt.  Therefore, just to put all the pieces together, if the consumer requests the collection company to cease and desist all collection activity, the collection company cannot call (defined as making the phone ring on the other end, therefore automated messages are unacceptable), send demand letters, or continue to report on the consumer’s credit report until they validate the debt.  This must be done within 30 days if the debt is currently being reported to the credit bureaus. If the debt is not being reported on the consumer’s credit report there is no actual deadline as to when the debt needs to be validated, but will usually within 2 months and the cease and desist clause applies.

Once the consumer receives validation in the mail, you still can get the collection agency off your back.  You could on the onset state that you do not work with collection companies and demand that they return the account to the creditor (since the collection company doesn’t have any actual contract to do business with you). Or, dispute the debt a second time.  Send in another letter of dispute within 30 days and the company has to delete it.  If you say that you still dispute this debt, that the amount isn’t correct, that this is the wrong person, that you don’t believe that you owe this, the collection company by law has to return the account to the creditor and delete all credit bureau reporting.  You should get a letter in the mail that says that the account is closed and the credit reporting has been deleted.

"I want my two dollars!" - Better Off Dead

If the collection agency still gives you a hard time after you invoke your rights under the FDCPA, you do have other options to take control of your debt.  I also spent some time working with the attorneys for the collection company I worked for, whose main concern was to respond various state’s Attorney Generals and Better Business Bureau complaints.  The AG’s and BBB’s can fine a collection company for misconduct.  This is always an option for a consumer who is not getting an answer from the collection company, or if they would rather have someone else do the dirty work without hiring an attorney of their own.  These regulatory agencies DO put pressure on the collection companies, usually unearthing some collector misconduct which the collection company’s attorneys must cover up with vague verbiage to avoid fines. In this way, the consumer usually gets what he or she wants.  Most of the complaints I saw were of mistaken identity, ineffective skiptracing techniques, or debt that was never validated after it was requested.

Again, the incompetence of the employees at company I worked for was staggering; I wouldn’t leave my credit reporting in their hands.  Here are some helpful links to get you started on your cease and desist letters:

Good resource for more in-depth information regarding the legalities of the law and what should be in your letter:

http://www.creditinfocenter.com/rebuild/debt_validation.shtml

Information about the FDCPA and recent articles regarding its enforcement:

http://www.ftc.gov/os/statutes/fdcpajump.shtm

So that’s basically it.  Please feel free to comment if you have questions or if I was able to help you out.

As an added bonus, my favorite pastime at work was compiling a list of ridiculous names and places.  Enjoy some of my favorite gems (some portions of names have been changed to help protect anonymity, but not enough to stifle giggles):

  • Mike Quackenbush
  • Christine Smellie
  • Saad Butt
  • Unique Blow
  • Lai Fong Winky Wong
  • Rip N. VanWinkle
  • Titus Dipfurd
  • Stella Dong
  • Gary Gray
  • Jose Cuervo
  • Misty Sweat
  • Donga Kpanza
  • Justin A. Shoestring
  • Goliath Davis
  • William Surgeon (Signed “Willie”)
  • Teresa Hooker, occupation: “Homemaker”
  • Dusty Knavel
  • Rush Forward
  • Joe Lickers
  • Tangy Bacon
  • Albie Damm
  • Mark Roudybush
  • Mike Hunt
  • Cherrie Aereola
  • Ginger Areas
  • Love Leigh Johnson
  • Rush Forward
  • Scott Trott
  • Kelly Queeflander
  • Geydhar Coiscou
  • Phat Dihn Ho (A legendary name on the collection floor…)
  • Alienor McCracken

Places:

  • Soddy Daisy, TN
  • Maybee, MI
  • Peculiar, MI
  • Eagle Butte, SD
  • Blacklick, OH
  • Chris Crossing, Ellenwood, GA
  • Fite Avenue, Defeated, IL
  • Chicatawbutt Street, Dorchester, MA

Melissia Elisa is a listener from Philadelphia and contributing writer for Stimulatedboredom.com

  • I love the “insider knowledge” vibe of this article, great piece Melissia!

    A couple of questions:

  • What is the truth behind the “7 year rule”, that all debt aged beyond 7 years must legally be dropped from your credit report?
  • When a collections firm buys up the debt from a company, is there a standard percentage of the total balance they pay? I assume that the vast majority of what is owed by the consumer is because of high interest rates and intangible penalty fees. So at the end of the day, with fees & penalties, the consumer thinks they owe $1,000 when the principle balance is really only $500 and then the collections firm buys the debt at a percentage of the principle (if that makes sense). Which would explain the, “great deal if you settle your debt today!” pitch.
  • I have been called by debt collectors in the past who have said that the original company can no longer accept payments, that they must handle the entire account. Is this bullshit or do some companies relinquish the full account to a firm and will not accept payments directly as a result?
  • I know people who say that they will get called by the same debt collector 10-15 times a day…seems like harassment to me. However, they may be ignoring the calls and letting it go to voicemail…so, would I advise them to answer the next call and request a ‘cease & desist’?

    Thanks again and I am looking forward to what questions others might have, as I think we all have received one of these calls before in the past.

  • melissiaelisa

    Dana, I am glad to contribute and share my knowledge to the masses! Please be aware that even though I’m an “insider,” I do not know all the answers and am only aware of how certain departments in my collection company (the largest one in the US, feel free to google search it) ran their business.

    1. The “7 Year Rule,” aka the Statute of Limitations, changes from state to state. Each state/region has a different law regarding the period of time the creditor has to collect on the debt, and even if the limitations period has expired, an acknowledgment or payment on the debt will start the period running again. Its good to know your state’s laws regarding this before agreeing to talk to a collector. There are some states, most notably Texas, in which collection companies cannot ask you to repay a debt if you dispute its validity, only if you agree to pay it. There are some great resources regarding the SOL, for more detailed answers try this site:
    http://www.fair-debt-collection.com/SOL-by-State.html#32

    2. Regarding the buying and selling of debt accounts, I was not a purchaser so I’m not too knowledgeable to the different contracts that are made with the creditor, but I do know that the terms vary greatly depending on the creditor. The collection company can either buy the debt outright or work the account on behalf of the creditor. Some creditors, like Citibank (who owns Department Store National Bank and all of its affiliates), include percentage fees in their contracts which are included in collections. My company held a huge array of different types of debt: from student loans from Sallie Mae and the Federal Government, the Department of Education (who can garnish your wages), medical bills, internet providers, anyone you could buy anything from. I see the tread being added percentage fees in credit cards, one time fees in many telecom companies, and no fees in medical bills. So yes Dana, your hunch is correct. The purchased accounts are purchased at a certain rate where the collection company thinks they can make money off of the purchase. Those purchased accounts can be bought and sold between hundreds of forwarding agencies and collection units, so who knows where your debt could end up. I can’t really give you a straight answer regarding how much the collection company can buy your debt for from the creditor, but the settlement offers can be very flexible for this same reason!

    3. This question relates to the previous question. If the account is purchased, the crediting company doesn’t accept payments since the account doesn’t belong to them anymore. You’re paying the collection company, not the creditor, who bought that debt at a fraction of what you actually pay it off for. I would recommend saying that you do not deal with collection companies, that you will only pay the creditor what you owe in principle, and don’t forget to mention that you request validation materials of the debt, do not call this telephone number anymore, and ask for an address to send your dispute letter to. It is always better to send a letter certified and keep a copy for yourself. In conclusion, call the creditor and tell them you’ll only work with them. Your legally binding contract with the creditor has nothing in there saying you HAVE to pay a collector (I hope not!).

    4. You always have the right to not be called excessively by the debt collector and only get letters. Some lovely buzzwords to get them to stop calling are “cease and desist all telephone calls,” “contact me only in writing,” “per the FDCPA do not contact me by phone,” or the all-powerful “What is your full name and extension? I want to report you to the Attorney General of my state.” The collectors are not idiots – most of the time they know that they are breaking the law! Yet they will still call to try to collect and maintain the quotas for their unit. Some states, especially Massachusetts, have telephone call limits per week which can be easily tracked and monitored for legal purposes. However, it is generally considered harassment in a court of law if the consumer is contacted by telephone over 3 times a day. I’ve seen it done, and I’ve seen collectors written up or fired for it, and the collection company to get fined for it too.

    The thing that stuck out to me the most was how little respect the collectors have for the debtors they are calling. It is seriously appalling, and a motivator to write about their practices. People need to know their rights and that they shouldn’t be harassed.

  • 2littlebluebirds

    Great article! I have a question for you. I have been receiving calls from creditors for 12 years now. The problem is I don’t own the debt and I don’t even know the people they are trying to collect from. It’s become obvious in the past 12 years that the debtors either had the phone number that we now have or they use our number on applications for credit. Each time the creditors call I explain the situation — We don’t know these people. This is a recycled phone number. We have been getting these calls for 12 years. Please stop calling.– We don’t seem to get repeated calls from the same company. It’s always a new company that I assume has taken over the debt from the last creditor that couldn’t collect, or the debtors continue to use our phone number racking up more debt. I got another call today and, finally at my wits end and sick of being nice and polite, asked to speak to a supervisor. Basically I was told that we would no longer get calls from his company, but there was nothing I could do to stop future calls from other collectors fishing for information. His advice–just politely tell the next creditor about our situation and ask them to stop calling. So basically I’m stuck getting calls from creditors (for a debt that isn’t mine) until the end of time? Is there absolutely nothing I can do other than to change my phone number? And if I do change my phone number will that actually put an end to this?? 

    Thanks so much for any advice you can provide. I’m tired of feeling like the victim! 

     Stephanie

  • 2littlebluebirds

    Great article! I have a question for you. I have been receiving calls from creditors for 12 years now. The problem is I don’t own the debt and I don’t even know the people they are trying to collect from. It’s become obvious in the past 12 years that the debtors either had the phone number that we now have or they use our number on applications for credit. Each time the creditors call I explain the situation — We don’t know these people. This is a recycled phone number. We have been getting these calls for 12 years. Please stop calling.– We don’t seem to get repeated calls from the same company. It’s always a new company that I assume has taken over the debt from the last creditor that couldn’t collect, or the debtors continue to use our phone number racking up more debt. I got another call today and, finally at my wits end and sick of being nice and polite, asked to speak to a supervisor. Basically I was told that we would no longer get calls from his company, but there was nothing I could do to stop future calls from other collectors fishing for information. His advice–just politely tell the next creditor about our situation and ask them to stop calling. So basically I’m stuck getting calls from creditors (for a debt that isn’t mine) until the end of time? Is there absolutely nothing I can do other than to change my phone number? And if I do change my phone number will that actually put an end to this?? 

    Thanks so much for any advice you can provide. I’m tired of feeling like the victim! 

     Stephanie