Tag Archives: small claims court

Dealing with Debt Collectors

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V0015846 Portrait of a debt collector (?) thumbing through his papers Credit: Wellcome Library, London. Wellcome Images images@wellcome.ac.uk https://wellcomeimages.org Portrait of a debt collector (?) thumbing through his papers outside a front door. Mezzotint by W. Bonnar after T. Bonnar the elder. By: Thomas the elder Bonnarafter: William BonnarPublished: - Copyrighted work available under Creative Commons Attribution only licence CC BY 4.0 https://creativecommons.org/licenses/by/4.0/

I was quoted by CreditCardGuide.com in Know Your Rights with Debt Collectors. It reads, in part,

Regardless of how deep your financial troubles go, you are protected by state and federal law when it comes to how debt collectors can treat you.

First off, you should understand who the people are behind the debt collection notices and phone calls. “A debt collector is defined as someone who is not the original creditor,” explains David Reiss, professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School, who also writes the REFinBlog. And, he says, what might start out as a legitimate debt collector contacting you on behalf of a creditor, can change over time since debt collection companies often sell their lists to other companies. Unfortunately, your contact information might end up with a fly-by-night operation that resorts to shady practices, such as trying to frighten you with threats and bullying.

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Consider this your peek into the debt collection rulebook so that you can arm yourself against abusive tactics:

What debt collectors cannot do

  • Call you under a false identity. “That means they cannot say they are an attorney if they are not, or say they are from the sheriff’s office if they are not,” says Reiss.
  • Discuss your debt with your employer, family members (other than your spouse), neighbors or publish your name on a list of people who owe money. “They can call a third party and leave a message for you, but they can’t disclose the details of your debt,” says Tayne. Generally, they can only discuss your debt with you, your spouse and your attorney.
  • Call you at ridiculous hours, such as before 8 a.m. or past 9 p.m. They also cannot call you repeatedly in a single day.
  • Be abusive, threatening or vulgar. In other words, says Tayne, they cannot bully you by calling you a deadbeat or loser for not making payments, and they should never curse at you.
  • Make false threats that they will seize your property, drain your bank accounts or arrest you, says Reiss.

What debt collectors can do

  • Contact you in person, by mail, by phone or by fax between the hours of 8 a.m. and 9 p.m. However, they can’t contact you at work if they are told you can’t get calls there. Also, if you write to them to stop calling you, they must comply, although they might respond by suing you, so think carefully before sending that letter.
  • Sue you in court. If they do, you’ll have to appear, and it’s in your best interest to hire an attorney. Ideally, you want to work something out before getting to this stage, says Reiss, because court and attorney costs can pile up.
  • Report you to the credit agencies. “Debt collectors can report your default to the credit bureaus,” says Reiss. This negative item will remain on your report for seven years, and your credit score will take a hit.

What you can do

If you think debt collectors are crossing the line, you do have options for recourse, says Reiss. “First, build up a paper record as this can help you later on.” That includes taking notes on every conversation you have, with dates, times and who you spoke to.

You could also try sending a cease-and-desist letter, or asking a lawyer to do so on your behalf, says Reiss. “They may be afraid and back off if a lawyer is involved,” he says.

Tayne finds that such letters aren’t always effective for more hostile debt collectors. “If they’re really out of line, file a lawsuit in small claims court,” she says.

You should also report shady collectors to your state attorney general’s office as well as the Consumer Financial Protection Bureau, say Reiss and Tayne.

If you do end up making a payment to a debt collector, request documentation that states your debt is paid, and then be sure that the payment is reflected on your credit reports within 90 days. You can get your credit reports for free at AnnualCreditReport.com.

Ideally, you don’t ever want to be in a situation in which debt collectors are tasked with contacting you, and incentivized to do whatever it takes to get you to pay them. But if you do end up in that situation, knowing your rights is your best defense. Says Reiss, “Debt collectors do not want consumers to invoke their rights under the FDCPA because the act can severely limit what they can do.”

Arbitration and The Common Mortgage

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The Consumer Financial Protection Bureau posted its Arbitration Study. This is a report to Congress that was required by Dodd-Frank. By way of background, the study states that

Companies provide almost all consumer financial products and services subject to the terms of a written contract. Whenever a consumer obtains a consumer financial product such as a credit card, a checking account, or a payday loan, he or she typically receives the company’s standard form, written legal contract.

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As a general rule, the parties to a dispute can agree, after the dispute arises, to submit the dispute for resolution to a forum other than a court — for example, to submit a particular dispute that has arisen to resolution by an arbitrator. (3)

Arbitration provisions typically do not directly apply to residential mortgages because Dodd-Frank “prohibited the use of ‘arbitration or any other nonjudicial procedure’ for resolving disputes arising from residential mortgage loans or extensions of credit under an open-end consumer credit plan secured by the principal dwelling of the consumer. 15 U.S.C. § 1639c.” (Arbitration Study § 5.4, n.34) But they can apply in mortgage-related contracts, such as those for title insurance, mortgage insurance and forced-place flood insurance. (§ 8.3, n.24 & Appendix S, § 8)

The Study thus holds some interest for those of us interested housing finance. The Executive Summary (§ 1.4) provides an overview of the CFPB’s research findings about arbitrations and other proceedings.

My overall impression after having reviewed the report is that consumers do not often raise claims against consumer finance companies in any forum, whether with an arbitrator or with a judge. The Study does not provide any information that would allow one to conclude what the socially optimal level of formalized disputes would be. It would be helpful for the CFPB to try to model that.