How to keep unethical debt collectors at bay

Opening Credits columnist Eric Sandberg
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

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Question for the expert

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

Answer for the expert Dear 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 illegally.

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 emergency help.

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'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 agenciesDebt collection sample letters, 5 key federal laws that protect cardholders, Get your real free credit report, Credit card hardship plans: A little known alternativeHow wage garnishment works, and how to avoid it

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Updated: 01-17-2018