How to keep unethical debt collectors at bay
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
If I have an unethical
collection agency that refuses to give me any information about where to send
payments unless I agree to their monetary amount, what do I do? They are
harassing me and multiple family members that live in numerous states. I am
medically disabled. I have sent numerous applications for medical deferment and
have never heard back. Wells Fargo was the original loan holder. How do I apply
for their loan forgiveness program for disabled? Please help as much as you
can! -- Nathan
It's hard to not feel defenseless when
an unknown entity is breathing down your neck, demanding money. You can regain
your power, though, by understanding exactly what your rights are and then taking
action. You see, the caller may not only be acting unethically, but also
First, about that loan forgiveness
program; I assume you mean a hardship plan that you initially tried to arrange
with Wells Fargo. Most issuers will work with cardholders when they experience
a crisis. But this is policy, not law. Even if they gave you a break, at some
point they'd have to do something with the unpaid debt -- either sue you or sell
it to a collection agency. The latter happened, and collectors don't offer such
So determine if you even have to pay
the balance. The statute of limitations for debt collection depends on the
state you live in. Check out CreditCards.com's interactive map of state statutes of limitations to see how long you can be sued. The time frame varies considerably. For example, in
Massachusetts, a creditor has six years from the date of last activity or
charge-off (when it was sold to a third-party collection agency) to sue you for
the debt. In Iowa, the limit is 10 years. Mind that this does not mean that the time frame begins each time
the debt is sold to a new collector.
To know where you are, check your credit report.
Let's say that the account was shuffled
off to a collection agency in December of 2006, and that you reside in
California, which has a four-year statute of limitations. In this case, the
collector would be unable to sue you for the debt because December 2010 has
already passed. Can they contact you and ask for payment? Sure! But their bark
will be louder than their bite, as they have no legal teeth to chomp you with.
Now, if the debt is young, the next
thing you need to do is figure out if you're judgment-proof. This does not mean
that you can't be taken to court. It means the creditor would receive
nothing if they sued you because you have no wages to garnish or property to
place a lien on or levy. If this is true, inform the collector of your
circumstances. They may choose to let the matter drop.
Be assured that the Fair Debt Collection Practices Act (FDCPA) protects you against the type of treatment you
described. Collection agencies are prohibited from harassing people and talking
to others about your debt. They must also inform you of their business address.
If they refuse, you should be able to find the company name and address on your
credit report. When you have it, you may file a complaint against them with the
Federal Trade Commission.
Finally, the FDCPA stipulates that you
can send a cease and desist letter, which will stop all contact. Only send this
if the statute of limitations has run or if you're judgment-proof, however,
since it can prompt legal action.
Of course, your other option is to pay.
If you can scrape up enough to cover the balance in full or offer a settlement,
great. What about making installment payments? It's a possibility, but beware:
doing so will restart that statute of limitations clock.
See related: 11 tips for dealing with debt collectors, collection agencies
, Debt collection sample letters
, 5 key federal laws that protect cardholders
, Get your real free credit report
, Credit card hardship plans: A little known alternative
, How wage garnishment works, and how to avoid it
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: March 2, 2011
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