Editor’s Note: This story originally appeared on The Penny Hoarder.
Debt collectors are not the people you want to make a regular appearance in your life.
Their frequent phone calls, letters, and emails can have you living in fear and stressing about finances all day, every day.
However, understanding the debt collection process and your options for finding relief, you may realize it’s not as hard as you thought to deal with debt collectors.
Who Are Debt Collectors, and What Do They Do?
While there are debt collectors who may work with your original creditor, such as a bank or credit card company, there are debt collectors who work for third-party agencies working on behalf of the original creditor. If the debt collector is working for a third-party agency, it is likely that the bill you owe is long past due.
Initially, a bank or credit card company will alert you that the time period allotted for paying a debt such as a loan or credit card statement is up. This may start as automated emails or calls, and then progress to phone calls from legitimate debt collectors who are working with the original creditor.
If you fail to respond to these messages, your debt is often moved through the debt collection process to third-party debt collectors.
Should you continue to ignore getting your debt paid, your debt may then be transferred to a debt buyer, a company that purchases debts and has its own in-house debt collectors.
5 Tips for Dealing With Debt Collectors
The debt collection process can seem overwhelming and never-ending, especially if you don’t have enough cash on hand to pay off your debt in one lump sum.
However, there are things you can do to eliminate old debt and legally take care of what you owe.
1. Know Your Debt Collection Rights
All three kinds of debt collectors — internal collectors, third-party collectors and debt buyers — must follow the set of rules laid out in the Fair Debt Collection Practices Act (FDCPA).
The FDCPA restricts the actions debt collectors can take to collect payments. While this information is a legal act, many collection agencies will disregard it in the hopes of illegally forcing you to pay the full amount of your debt quickly.
For example, one debt collector in New York was fined $60 million in 2022 for running a debt collection scam via his debt collection agencies. It is illegal for debt collectors to threaten you or your family.
You can even cease all communication with your debt collector. However, that is an unwise move and can have a negative impact on the debt collection process, said Bruce McClary from the National Foundation for Credit Counseling.
“When you request to have communication completely cut off and you just want to drop off their radar, that sends them a signal that you have zero intention of paying ever, and it may accelerate some of their actions in trying to recover the debt in other ways,” McClary told The Penny Hoarder.
Options for Working With a Debt Collection Agency
You have options when working with a debt collection agency on your debt. Other protections provided by the FDCPA include:
- Debt collectors are required to provide proof that you owe the debt.
- They can’t call you before 8 a.m. or after 9 p.m.
- They can’t call you at work if you tell them it could put your job in jeopardy.
- While it’s legal for them to call a family member or friend to find you, a debt collector cannot give them details about your debt. And they can only call each family member or friend one time in most states.
The FDCPA does not, however, protect you from people collecting on personal debts. It only applies to third-party debt collectors.
What to Do and Where to Go
If you are the victim of unfair debt collection practices, here are the resources you need to file a complaint:
- File a complaint about a debt collector or creditor’s in-house collection agency: U.S. Consumer Financial Protection Bureau, 855-411-2372 or the complaint form on the CFPB website.
- File a complaint with your state consumer protection agency: Find your state attorney general through the National Association of Attorneys General.
- File a complaint with the Better Business Bureau: BBB’s Online Complaint System
- File a civil suit in your state or federal court: Find a consumer lawyer in your city or state from the National Association of Consumer Advocates.
2. Know What Collectors Can and Cannot Do to Collect Debts
Ignoring a debt collection agency won’t make the amount you owe disappear. In fact, it could make your financial problems even worse. You could even end up in court if the debt collector decides to file a lawsuit against you.
There are some limitations when it comes to what debt collectors can and cannot do to get you to pay the amount you owe, however.
Can Collectors Sue Me or Garnish My Wages?
Debt collectors can serve you with a court summons to sue you in an attempt to collect a debt, which could result in wage garnishment. But they can only sue within the statute of limitations.
In most states, the statute of limitations to sue for debt is three to six years. Collectors will still continue to try to collect on the debt — in an attempt to restart the statute of limitations — but if you’re sued past it, you could likely get the case thrown out.
Can I Go to Jail for Being in Debt?
There are very few situations that could result in you getting arrested over an unpaid debt, according to the CFPB: The two situations that could result in you in going to jail over your lump sum could be: Your debt is related to criminal activity — unpaid restitution for a crime, for example — and second, if you ignore a court order. In most other situations, you won’t be arrested for unpaid debt.
In essence, so long as you don’t do anything illegal or ignore a court summons, you’ll be safe.
Further, it’s illegal for a debt collection agency to threaten you with arrest if jail time is not an actual punishment that could happen as a result of your specific debt scenario. And if you were told you’d be arrested for unpaid debt and you later find out that was false, you can file a complaint about the debt collection agency using the above chart.
Can a Debt Collector Make Me Pay a Family Member’s Debt?
If you receive a call from someone trying to locate a relative, it might be a debt collector. These calls are legal, but they can only call you once — and only to locate the debtor.
If you receive any more calls or are asked for any information other than your family member’s location, you can file a complaint against the debt collector.
Rest assured that if you didn’t co-sign for the debt in question and the person is not your spouse, you typically have no responsibility for the debt, in life or death.
What Should I Do if I Can’t Pay?
If you can’t pay the full amount you owe or the monthly minimum payment, work with your creditor to create a payment plan for the debt or seek help from a credit counseling agency.
A credit counseling agency is a nonprofit financial institution that will set a debt-management plan for you to repay your debt.
The agency pays your creditor for you and stops fees and charges on late payments, lowering your debt burden and ensuring you stay current. Through these agencies, you can usually pay off your debt in three to five years, and your credit score may even improve during that time.
3. Check Their Facts
If you think a collector’s information is wrong, go with your gut. When debts get sold between companies, lots of information can get lost in the swap. And even if you’re wrong, your due diligence could work out for you in the end.
Daniel Gillaspia, attorney and owner of travel rewards website UponArriving, and his partner, Bradley, learned this when Bradley got denied for a credit card. After the denial, Bradley saw in his credit report that a $1,000 medical debt had been sold to collections, which he thought had reset the statute of limitations.
“We didn’t feel this was fair,” said Gillaspia. “So I sent a legal demand letter to the collections agency.”
It turns out the update didn’t move up the statute of limitations, and the inquiry worked in their favor.
Once the company received the demand letter, the account had to be reported as “in dispute” while it verified details. Once they agreed on the settlement amount, the company agreed to take the collections account off Bradley’s credit report.
4. Keep Detailed Records
It’s important to remember that debt collectors have a job to do. They are not your allies. It’s up to you to keep track of their letters, emails, phone calls, and financial information.
You have a right to record phone calls with debt collectors. Just make sure you notify them before you start recording. If they refuse to be recorded, hang up and reach out via email instead so that everything is in writing.
If you forget to record a call, keep detailed notes about what you discussed. This will come in handy if you ever need to file a complaint against an abusive debt collector or have to fight in court to prove that the debt isn’t yours.
Even after you’ve made your last payment toward the debt, don’t throw those records away. You could need them again.
Raeshal Solomon, author of the “My Little Banker” series, settled an old college debt and made sure to get the settlement receipt showing her $0 balance emailed to her and sent to her home.
“In the past two years, that same debt balance has been sold to three other agencies,” Solomon said. “Every time I get a call from a new agency, I kindly get their email address and forward them a copy of my receipt. After a few days, the calls stop.”
5. Take Control of the Communication Process
If the calls are incessant and you want them to stop, be sure to request the change in writing. This can be via email or a cease and desist letter sent via certified mail. The CFPB provides a series of template letters to help you communicate with debt collectors in writing.
In most cases, dealing with a debt collector might be a little unpleasant, but in those situations when a collection agency violates the law with nonstop phone calls or threats of violence, you’ll need to exercise your consumer rights and file a complaint with the CFPB.
Filing a complaint with the FTC or the CFPB will usually be enough. In extreme cases, you can either report the harassment to your local law enforcement agency or the FBI.