A phone call or letter is often the first sign that you have an account with a collection agency. These bills collectors don’t go away easily and some of them have been known to cross the line to get consumers to pay up.

How Debt Collections Happen

As an adult, you probably have several accounts with various companies: credit card issuers, a mortgage lender or landlord, a cell phone service provider, and other utility companies. As long as you’re paying all these accounts on time, you typically have nothing to worry about. But, when these accounts go past due and remain delinquent for several months, companies put more effort into collecting payment.

Any services you receive will be disconnected after a few missed payments, but you’re still liable for the past due balance. Many companies have their own in-house collections team that will call you or send letters urging you to pay. However, companies only use so much of their own time and resources trying to get payment before they employ specialists to do the job for a lower cost. That’s where debt collectors come in.

Debt collectors are third-party companies who collect debts on behalf of other businesses and even individuals. After the company exhausts their own efforts on collecting from you, they assign or sell the account to a debt collector. Debt collectors who’ve been assigned to the account get to keep a part of whatever money they collect from you. To increase their own profits, debt collectors are often aggressive in their collection tactics.

The Impact of Collection Accounts

When you have an account turned over to a collection agency, annoying calls and letters are the least of your worries. Owing a debt collector has several consequences that you may not get rid of for several years, even after you’ve paid the account.

Collection accounts are almost always added to your credit report – the document that companies like banks and other service providers use to decide whether they want to do business with you. Because the collection account is listed as a negative item on your credit report, it will also hurt your credit score.

You might be turned down for a credit card, loan, or an apartment if you have a debt collection on your credit report. Or, if you’re approved despite the collection account, you may have to pay a higher interest rate or a higher security deposit.

Collections will remain on your credit report for seven years, starting from the date the original account became delinquent. Paying the collection doesn’t remove it from your credit report.

The Law for Debt Collectors

The Fair Debt Collection Practices Act is a Federal law that all third-party debt collectors are required to follow. The law is intended to protect consumers from abusive debt collection practices. Debt collectors are only allowed to call you between the hours of 8 am and 9 pm, your local time unless you give them permission to call you at another time. You can stop debt collector calls by sending a written cease and desist letter asking you to stop contacting you.

You also have the right to request proof of the debt a collector alleges you owe. This request for proof is known as a validation request. You’re allowed to send this written request within 30 days of first being notified of the collection. Once you send the validation request, the debt collector can’t contact you again until they’ve sent the proof that you asked for.

Debt collectors aren’t allowed to threaten or harass you or use profanity when they speak to you. They can’t lie about who they really are or misrepresent the amount you owe. Furthermore, debt collectors can’t threaten to take any action against you if they’re not legally allowed to take that action or even if they don’t intend to do it.

Currently, the Federal Trade Commission (FTC) is the government agency responsible for making sure debt collectors follow the law. You can report law violations to the FTC by visiting FTCComplaintAssistant.gov or by calling 1-877-382-4357. You can also submit a complaint to your state Attorney General.

Any account, even a library fine or past due rental fee, can wind up with a debt collector. The best way to avoid collection accounts is to pay all your accounts on time, even those that seem insignificant.

Source: FTC.gov