Protecting Yourself from Bad Debt Collectors

Bad debt collectors can be relentless and intimidating, but there are ways to protect yourself from their tactics.

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates debt collection activities. It prohibits debt collectors from engaging in abusive, deceptive, or unfair practices.

You have the right to request validation of the debt, which means the collector must provide proof of the debt within five days. This can help you determine if the debt is even legitimate.

Don't be afraid to ask questions or dispute the debt if you believe it's incorrect.

Bad debt is essentially a type of debt that is unlikely to be repaid, often due to the debtor's financial inability to pay.

This can happen when a borrower misses payments, and the lender has no way to recover the debt. For example, a borrower might take out a loan but then lose their job or experience a medical emergency, making it impossible to repay the loan.

Bad debt can be a significant problem for businesses, as it can lead to financial losses and damage to their reputation. In fact, it's estimated that bad debt can account for up to 10% of a company's total receivables.

Bad debt is often categorized into two types: uncollectible accounts and doubtful accounts. Uncollectible accounts are debts that are considered to be completely uncollectible, while doubtful accounts are debts that may be collectible but are still uncertain.

The likelihood of a debt becoming bad debt can be determined by a company's credit policy, which outlines the procedures for handling delinquent accounts. A company's credit policy can also impact their ability to recover debts.

In Texas, the statute of limitations on debt is four years, as stated in Section 16.004 of the Texas Civil Practice and Remedies Code. This means that debt collectors in Texas have a limited time to sue or take action on a debt.

Under the Texas Finance Code, debt buyers are required to provide written notice to consumers if the limitations period has expired. This is in addition to the federal rules that prevent debt collectors from suing or threatening to sue over time-barred debts.

In Maryland, debt collectors are prohibited from using or threatening force or violence, threatening criminal prosecution, and disclosing false information that affects a person's creditworthiness. They are also not allowed to contact an employer before obtaining a final judgment.

Here are some key laws and regulations to know when dealing with debt collectors:

The Fair Debt Collection Practices Act prohibits debt collectors from making unfair or unconscionable means to collect a debt, as well as harassing, oppressing, or abusing consumers.

In Maryland, collection agencies need to get a license from the Department of Labor, Office of Financial Regulation.

You can check a collection agency's license status through NMLS, a multistate platform for licensing.

Don't be surprised if you come across a business operating as an unlicensed collection agency - it's more common than you think.

Contact an attorney if you suspect a business is running without a license.

Any judgments obtained by an unlicensed business are void, which means they're not enforceable.

There's no time limit for claiming a judgment is void due to lack of a collection agency license.

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from contacting you at work if they know your employer doesn't allow it. This means they can't call you at your office or workplace.

Debt collectors are also not allowed to contact you at inconvenient times or places. They can't call you before 8:00 a.m. or after 9:00 p.m. unless you've told them it's okay.

You still owe time-barred debts, but creditors and debt buyers lose their most powerful way of collecting – a lawsuit. In Texas, the statute of limitations on debt is four years, which means creditors can't sue you after that time has passed.

If a debt collector is aware that an attorney represents you, they must direct all communications regarding the debt to your attorney. This is a requirement under the FDCPA.

A debt collector can't lie about the debt or the consequences of non-payment. They can't threaten to take legal action that they don't intend to take.

Here are some specific laws and regulations that govern debt collection:

The FDCPA rules say the collection agency must answer consumer questions truthfully. If you're unsure whether the statute of limitations applies in your case, simply ask the collection agency if your debt is “time-barred” meaning the statute of limitations has run out.

There are limits on the amounts debt collectors can legally garnish from your income.

The maximum amount that can be taken from a paycheck is 25% of your disposable earnings.

The amount that can be taken from your paycheck is also limited to the amount by which your wages exceed 30 times the federal minimum wage.

You can file for complete exemption from wage garnishment if it will cause you or your family financial hardship.

Collector Behavior can be truly shocking. Using abusive collection tactics is not only unacceptable but also against the law.

Some collectors resort to threatening violence or other criminal acts to get what they want. This is never an acceptable way to collect a debt.

Other collectors use profane or obscene language to intimidate debtors, which is completely unacceptable. It's also worth noting that collectors should never falsely accuse consumers of fraud or other crimes.

Some collectors even go so far as to threaten arrest or repossession of property without proper court proceedings. This is a clear abuse of power and can cause significant stress for debtors.

Collectors who engage in these behaviors are not only breaking the law but also damaging their own reputation. If you're dealing with a collector who's being abusive, it's essential to document everything and seek help from a consumer protection agency or a lawyer if necessary.

Here are some examples of abusive collector behavior:

Debt collectors are individuals or companies hired by creditors to collect debts from people who owe money. They are often associated with aggressive tactics, but some debt collectors are more professional and respectful than others.

Debt collectors typically work for a third-party agency or a creditor's in-house collection department. They may contact debtors by phone, email, or mail to request payment.

Debt collectors are regulated by the Fair Debt Collection Practices Act (FDCPA), which prohibits them from using abusive or deceptive tactics to collect debts.

Debt collectors are not allowed to use abusive tactics to try to collect a debt from you. They can't threaten violence or other criminal acts, use profane or obscene language, or falsely accuse you of fraud or other crimes.

Threatening arrest is also off-limits. A debt collector can't say you'll be arrested if you don't repay the money they say you owe. However, if you receive a legitimate court order to appear in court on a matter related to a debt and you don't show up, the judge could issue a warrant for your arrest.

Debt collectors can't also use the telephone to harass you by calling anonymously or making repeated or continuous calls. They can't make collect telephone calls without disclosing the true name of the caller before the charges are accepted.

Here are some specific ways debt collectors are not allowed to harass you:

Fake debt collectors are out there, using the same tactics as real agencies to scam people out of money. They often target "phantom debts" that are too old to collect or were never proven to be valid.

To spot a fake collector, ask for their name, company name, street address, and business phone number. Verify each answer before talking to them again.

Fake collectors can find debtors through databases that sell personal information, mailing lists, credit applications, and even calls to relatives and friends. They may also use post office forwarding addresses.

You can't inherit debt unless you were a cosigner. Collection agencies have been known to try to scam relatives into paying the deceased loved one's debts, but they can't come after you to pay debts a relative is responsible for.

You have the right to protect yourself from harassing debt collectors. Under Maryland's Consumer Debt Collection Act, debt collectors may not use or threaten force or violence, or threaten to disclose information affecting your reputation for creditworthiness if they know it's false.

Debt collectors also can't contact your employer about a debt before obtaining a final judgment. You can also stop them from contacting you by sending a cease-and-desist letter by certified mail, which is a simple and effective way to put a stop to unwanted calls.

Here are some specific things debt collectors can't do:

Remember, you don't have to deal with debt collectors on the phone if you don't want to. You can send them a cease-and-desist letter and keep a log of all calls and letters from them.

Maryland's Consumer Act is a crucial piece of legislation that protects consumers from unfair debt collection practices. Under this act, debt collectors may not use or threaten force or violence.

Debt collectors are also prohibited from threatening criminal prosecution unless a violation of criminal law is involved. This means that if you owe a debt, you can't be threatened with jail time unless you've actually broken the law.

Debt collectors can't disclose or threaten to disclose information affecting your reputation for creditworthiness if they know the information is false. This includes making false claims about your financial situation or history.

Debt collectors are also restricted from contacting your employer about a debt before obtaining a final judgment. This means that your employer can't be contacted about a debt unless the debt collector has won a court case.

Debt collectors may not disclose or threaten to disclose to a person other than you and your spouse (or if you are a minor, your parent(s)), information affecting your reputation if they know that the person the debt collector is telling does not have a legitimate need for the information.

Here are some specific examples of what debt collectors can't do:

By understanding your rights under Maryland's Consumer Act, you can protect yourself from unfair debt collection practices and keep your financial information private.

You have the right to negotiate with debt collectors, and it's often a good idea to do so. You can try to settle matters with the debt collection agency by negotiating a deal that works for you.

First, figure out how much you can afford to pay, and see if the collection agency will agree to that amount. The money could be a lump sum or monthly payments.

If possible, conduct negotiations at the end of the month. Collection agents often have deadlines and monthly goals they must meet, which can make them more willing to negotiate your debt.

Here's a summary of the negotiation process:

Getting the agreement in writing is crucial to protect yourself. If the collection agency accepts your terms, you should have a written proof of how much will be paid and by what date that amount must be paid.

You have the right to remain silent when dealing with debt collectors. You don't have to talk to them at all.

If you send a cease-and-desist letter by certified mail, debt collectors can't call you to discuss the debt. Keep a log of all calls and letters from them, including the time and date they called and the agency's name.

Collection agencies can still try to collect the debt, but they can't call you. They might send a summons or court notice instead.

If you have an attorney, refer all calls and mail to your lawyer. This can help protect your rights and prevent debt collectors from harassing you.

Sending a cease-and-desist letter doesn't mean you're avoiding the debt. It just means you're not engaging with the collector.