Understand the Law and Debt Collectors Before it’s too Late
So, you’ve received a debt collection call or letter…
In this day and age where you have rampant foreclosures, layoffs and job losses, it is simply inevitable that an individual may come across a debt collector, and frankly even without these external factors, it may just happen by a chance wrong number or even being related to someone going through a hard time financially.
Below I will detail the key steps you should take to secure your rights, aggressively defend yourself, and ultimately make the debt collectors pay YOU to go away.
The War for Your Money
There is a battle out there folks, and like it or not, you have been drafted. This is the war for your money. Banks, credit card companies, credit bureaus, and debt collectors are all in it together on one side, and on the other is you and me, the average consumer on the other. I wish I could describe it as a fair and free negotiation for goods or services, but it simply is not. Consumers need to understand that there are smart, well-heeled interests seeking to exploit them and take advantage of them every chance they get.
Don’t believe me; just look at what these parties have done over the years: Two cycle billing, mandatory binding arbitration, the latest bankruptcy reform, below market mortgage deals for legislators, and the list goes on and on. These are all co-ordinated efforts to take away your rights and to turn you into a financial slave.
Consumers need to adopt an aggressive, litigious mindset and understand that Angelo Mozillo (former CEO of Countrywide) is not your friend. In fact, if you are trying to do a loan modification, he thinks you are disgusting. When these morons have a problem and make a bad decision, it is a national emergency requiring lots of our money, but woe to thee if one of us mere mortals has a financial problem or makes a mistake. They’ll have no mercy on us and respond with bad credit reporting, inflated demands for money, baseless lawsuits, etc… Well, I say enough is enough.
How people fall into debt
Credit and failure to repay financial products. One such product is the payday loan.
This form of debt is known as a ‘snowball effect,’ as the debt gains its own momentum. The debt from emergency loans simply gets out of control and ends up in what is termed a debt cycle, if it is not returned in time.
This occurs as the borrower repays the original loan with interest but does not have any other financial means to see them through the month, they get tempted to take another emergency loan in order to simply manage. They are now trapped in a payday loan debt cycle.
If the worry is about the debt from loans, then the best option available to you is to analyse your budget. Take a paper and make two columns, your income and your expenditure. This will give you a gross outlook of your budget and you will be able to improvise to minimise your expenditure and maximise your income. You can even go ahead and speak with your creditors and hire services of certain companies to get the interest freeze.
Stand up to lawbreaking debt-collection practices
More to the point, debt collectors routinely violate the law in various ways, at which point the collectors most likely owe the consumers money. Consumers up to now have not made the collectors pay.
This is how the primary law, the Fair Debt Collection Practices Act was designed to work by congress: private attorney generals (that’s’ you) suing debt collectors into compliance. The basic strategy is to document violations of the law, file suit, and usually the smart collectors will hand you some money and beg you to leave them alone. Once a collector violates the law that is your opportunity to make them pay, literally.
The terminal purpose should be you facing your creditors in a court of law with their name under the Defendant column. Notice, I didn’t say draft Intent to sue letter, threaten to file suit, get an attorney to write a letter, or any of that crap. File a lawsuit. It isn’t hard, it isn’t scary, and it isn’t prohibitively expensive. I will show you the way, lock and load and follow me!
Know Your Enemy & The Battlefield
The very first thing I would do is punch their name into Google. Google will give you some idea of the agency’s tactics and reputation, there you will find Company’s House among other useful results. Company’s House will give you more detailed information from a consumer viewpoint. Review websites will also have a good database of the major players in the debt collection industry and their tendencies, so you can know what to expect going forward.
• Does the collection agency have a tendency to violate the law?
• Are they complete fraudsters?
• Are they operating under a consent agreement from the FTC?
These are key questions you can get an early indication of by doing some basic research. Additionally, check some of the consumer message boards: creditboards.com is a good place to start. It’s not uncommon to find someone currently dealing with or someone that has dealt with that company in the past. Start a thread and enlist your fellow consumers for help, they are more than likely willing because we’re all in this war together.
Second, find out the company to see if they are bonded or licensed as required by state law. You need to understand the requirements your state imposes on debt collectors. I have found that this Debt Consolidation resource page is one of the best places out there to learn the requirements debt collectors have to satisfy. Some states require only a license, some require only bonding, and others require both. I list the requirements for each and every state in this article but do yourself a favour and at least become familiar with what your state requires. This is important because if they aren’t compliant, each of their collection attempts is illegal and you can drag their butts into court.
Finally, and this should go without saying, but you need to be very familiar with the debt collection laws in your state and the Federal laws that cover this. Do you know what the maximum penalty for debt collector violations under state law is in North Carolina? (It’s $2,500 per violation) Can a debt collector call your relatives (yes if they do not have your location information, otherwise no) Is that a violation for a debt collector to call at 7:30 AM? (yes) Say you received an initial call from a collector, is there anything else they have to do? (yes, send you a summary of your rights under the FDCPA within 5 days). I wouldn’t expect everyone to be able to spout off the laws on command, but certainly know what laws apply and where to find them.
Writing a debt collection dispute letter
Writing a debt collection dispute letter is the first line of defence against a debt collector. Make them prove that the debt is legitimate before you do anything. Just because they have your name doesn’t mean the debt is legitimate. If you don’t remember it or you remember paying it off, a dispute letter can help you resolve it quickly.
Once you know who is calling you and what they are likely to do, it’s time to push back with a properly worded dispute letter.
Why? First, it’s fully within your rights to have the debt validated
Second, many collectors try to add on fees, inflate the amount owed through interest, or otherwise get a little extra for their trouble. For folks terrified of your credit score, immediately paying a collector can earn you a big fat “paid collection” on your credit reports, which will tank your credit score just like an “unpaid collection” will.
If collectors can allege that you owe money, they should be able to prove it. Most people would laugh at the concept of paying a random stranger who asks for money, but somehow paying a random voice on the phone demanding money or letter makes sense. Instead of buying into such insanity, demand to see a bill or documentation of the debt.
Under Federal law, a dispute and validation request require the collector to cease calling and obtain and send validation from the original creditor to you the consumer. Ceasing collection efforts properly would require putting all efforts on hold: phone calls, letters, credit reporting, etc. This doesn’t always happen, and when the collector fails to do so, they owe you money for each violation.
There are a lot of bad debt validation letters floating around on the internet. They are bad because they ask for things a debt collector isn’t required to provide. They usually start with “This is not a refusal to pay but notice that your claim is disputed.” I can’t go into go into the many, many things that are wrong with these letters in this article and keep this article under 30 pages, but just remember the KISS principle and apply it here.
What does a debt validation letter need? No need to get fancy:
• I dispute, please Validate
• Do not sign the letter
• Send it via certified mail
Pretty simple, right? Some may wonder why you don’t sign the letter. Some debt collectors might be tempted to do some Xerox magic and transfer your signature onto some other documentation where it previously was not. Furthermore, the Fair Debt Collection Practices Act (FDCPA) doesn’t require a signature, so why bother?
If you don’t want the collectors to call your place of employment add: “My employer does not permit calls at work or just tell them not to call you at work.”
Alternatively, if you don’t want them to call your house or at all, just add that “all phone calls are inconvenient.” Why inconvenient? The FDCPA prohibits calls to places or times that the consumer deems inconvenient. Just state that calls to your cell phone or house or all calls are inconvenient, unless you like getting debt collection calls.