The Fair Debt Collection Practices Act explicitly forbids debt collectors from making empty threats and gives consumers some protections against unfair debt collectors.
You might even have already been contacted by a debt collector who threatened to sue you. However, legally they cannot make empty threats.
The Fair Debt Collection Practices Act explicitly forbids “the threat to take any action that cannot legally be taken or that is not intended to be taken.” This law also outlaws “the use of any false representation or deceptive means to collect or attempt to collect any debt.”
Even then, the Consumer Financial Protection Bureau reports that in the last year its examiners have come across debt collectors that have threatened lawsuits against consumers that they have no intention of pursuing, or that they could not legally file. That being the case, you should be aware of how to deal with such empty threats.
How debt collectors come into the picture
Typically, at the point where you are six months past due on your card payment your lender will decide to take serious action. It could turn to an external debt collector firm to follow up on the debt. The debt collector will then contact you and attempt to collect on the debt.
Your lender could also sell your debt to a debt buyer, which buys the debt at a discounted rate (paying less than what it is worth). Such debt buyers could also hire a debt collector to follow up with the actual process of collecting on the debt.
Before deciding to take legal action to collect, debt collectors typically consider factors such as how old the debt is, the amount of the debt and whether you will be able to pay up on the debt. If the debt amount is low, it may not be worth their time and money to actually take legal action against you.
If you don’t own any real property and don’t have garnishable wages, or in general don’t show any sign of being able to repay the debt, that’s another factor that could stop a debt collector from actually suing you.
And if the debt collector has no tangible proof that you actually owe the money, such as a written contract, that would also be a deterrent to taking actual legal action. The debt collector would also take into account whether the lender is actually interested in pursuing a lawsuit.
See related: Feds crack down on abusive debt collection practices
What to do if a debt collector threatens to sue you
In spite of the FDCPA ban, debt collectors who have weighed all the factors and decided that they are not going to actually sue you may still make an empty threat.
For instance, according to the law firm Friedman Murray, debt collectors could indicate that they “can” sue you. They could say they are referring the debt to a lawyer for “collection action,” or that they are “authorized to proceed with legal action.” They believe that making such threats will scare consumers into coming up with payments.
In an online post, the law office of Paul Mankin advises that when a debt collector threatens to sue you:
- Don’t admit that you owe the money. That way, it is up to the debt collector to prove that you do owe this money. In case they record you saying that you owe the money, or have any other communication from you to that effect, they won’t have to prove your liability in order to get a judgment against you.
- If you don’t believe that the debt is yours, or it’s an account that you have already paid off, ask the debt collector to provide proof of the debt to you.
- Keep a record of your communications with the debt collector. This could include phone calls (for which you should note the time and date of the calls and the name of your contact person), or written communications. That way, you could turn the tables on them and file a lawsuit under the FDCPA if they are violating this law.
- You should also think about consulting with an attorney to get legal advice about your rights and course of action.
There are also specific time limits beyond which you can’t be sued for debt repayment. These statutes of limitation vary by state. Be careful that you don’t make payments on any debt that is past this timeframe since that would reactivate your legal liability.
If you believe that a debt collector is making misrepresentations to you, you could also file a complaint with the Consumer Financial Protection Bureau, the Federal Trade Commission or your state attorney general.
Email me at email@example.com with your credit card-related questions.