What Debt Collectors Can and Can’t Do

As pandemic-related relief programs come to an end, many Americans are struggling to manage their debt. Getting a call from debt collectors can be stressful and intimidating. Questions may race through your mind, can they take money directly from your paycheck, notify your employer, or even have you arrested? The key to managing this situation is knowing how the process works and understanding your rights under debt collection laws.

 

When you miss payments, lenders usually try to collect the debt themselves for a few months. If those efforts fail, they often turn the account over to a third-party debt collector. At that point, your original account is labeled as a charge-off and shows a zero balance on your credit report. A new collection account will appear, reflecting the amount owed, and the debt collectors will begin reaching out to you.

 

Both charge-offs and collection accounts are serious negative entries on your credit report. They can significantly impact your credit score and will remain on your report for seven years from the date you first missed a payment. Being aware of your rights and protections under debt collection laws can help you respond appropriately and avoid unnecessary stress.

What Is a Debt Collector and How Do They Operate?

A debt collector is a person or agency that works to recover unpaid debts on behalf of creditors. When you miss payments on things like credit cards, loans, or medical bills, lenders may hire or sell the debt to collectors to get the money back.

 

Collectors usually start by contacting you through calls, letters, or emails to arrange repayment. If that doesn’t work, they might report the debt to credit bureaus or take legal action. Many are paid a fee or earn a percentage of what they collect.

 

Debt collection is regulated to protect consumers from harassment or unfair practices. You have the right to request proof of the debt, dispute errors, and limit communication. Knowing your rights can help you handle debt collectors with confidence.

The Fair Debt Collection Practices Act (FDCPA) Overview

The Fair Debt Collection Practices Act, or FDCPA, is the main federal law that sets the rules for how debt collectors must behave when trying to collect money from consumers. Passed in 1977, this law was created to protect people from unfair, aggressive, or deceptive debt collection tactics. It applies to third-party debt collectors, meaning companies or individuals who collect debts on behalf of someone else, like collection agencies or lawyers hired to collect past-due debts.

 

Under the FDCPA, debt collectors are required to treat you fairly and respectfully. They cannot use threats, harassment, or misleading information to pressure you into paying. For example, they’re not allowed to call you repeatedly at odd hours, threaten legal action they don’t intend to take, or share details about your debt with others. The law also gives you the right to request validation of the debt, so you can make sure the amount they say you owe is accurate.

 

If a debt collector breaks these rules, the FDCPA allows you to take action, including filing a complaint or even suing for damages. Knowing your rights under the FDCPA is important because it helps you avoid scams and abusive practices, giving you a clearer, safer path to handling your debts.

What Debt Collectors Can Do

The Fair Debt Collection Practices Act (FDCPA) outlines the legal actions debt collectors can take when attempting to recover unpaid debts. Here’s a clear breakdown of what they are permitted to do under this federal law:

 

Reach out to you through multiple channels

Debt collectors can contact you by phone, mail, email, or text unless you send a written request asking them to stop.

 

Leave voicemail messages

They are allowed to leave a message informing you about the debt, as long as it complies with disclosure requirements.

 

Use social media to get in touch

Since November 30, 2021, debt collectors can contact you via direct messages or friend requests on social media platforms. However, they must clearly state they are debt collectors in any communication.

 

Speak with others to locate you

Collectors can call your relatives, friends, or employer solely to gather information about your address, job location, or phone number but they cannot discuss your debt.

 

Take legal action against you

Ignoring a debt collector’s lawsuit might result in a default judgment in the collector’s favor. They may be able to access or freeze your bank accounts, garnish your earnings, or put a lien on your property as a result of this decision.

 

What Debt Collectors Can’t Do

The Fair Debt Collection Practices Act (FDCPA), recently updated to strengthen consumer protections, outlines clear limits on how debt collectors can operate. Here’s what they’re prohibited from doing when trying to collect a debt:

 

Charge unauthorized fees or interest

Debt collectors cannot add extra fees, charges, or interest to your original debt unless it’s allowed by your state law or the agreement you signed with the original creditor.

 

Process postdated checks ahead of time

They are not permitted to cash a postdated check before the date you’ve written on it.

Seize or threaten to seize your property unlawfully

Unless your contract or state law gives them the right, debt collectors can’t take your property or threaten to do so.

Use threats, lies, or abusive language

They can’t threaten violence, use obscene language, misrepresent the amount you owe, impersonate an attorney, or falsely claim you’ll be arrested over the debt.

Harass you or others

Harassment in any form, including excessive phone calls, public shaming, or intimidation tactics, is strictly forbidden.

Contact you directly if you’re represented by an attorney

The collector must speak with the attorney you have retained to manage your debt issues rather than reaching out to you directly.

Call outside of reasonable hours

They cannot call before 8 a.m. or after 9 p.m. unless you’ve given them specific permission to do so.

Contact you at your workplace when not allowed

Debt collectors are not permitted to phone you at work if your company forbids personal calls.

Make excessive calls

As of November 30, 2021, a debt collector cannot place more than seven phone calls per week to you or your contacts about a specific debt.

Expose your debt on social media

Collectors are not allowed to post publicly or send messages that can be seen by others. Only private, direct messages are permitted and even then, they must identify themselves as debt collectors.

Use revealing or inappropriate mail

They can’t send postcards or use envelopes that indicate the letter is from a debt collection agency.

Pursue lawsuits after the statute of limitations

Once the legal time limit for collecting a debt expires, they can’t sue you. The length of this limit varies by state, so check with your state attorney general’s office for details.

What You Can Do to Deal With Debt Collectors

A written notification must be sent within five days of the debt collector’s initial contact. The amount you owe, the identity of the creditor, and what to do if you think there was an error should all be made clear in this notification. You are entitled to request a validation letter if you have previously paid off the debt or if you believe there was a mistake. This document attests to the debt’s validity and the fact that it is still within the allotted time frame for collections in your state. 

 

One of the most effective ways to deal with a debt in collections is to pay it off as soon as possible. But if that’s not financially feasible, consider negotiating directly with the debt collector. You might be able to set up smaller monthly payments or even settle the debt for less than what you owe. Keep in mind that a settled account will be marked on your credit report as “paid for less than the full amount.” While this isn’t ideal, it’s often viewed more favorably by lenders than an unpaid debt. Always make sure you get any agreement in writing before you send money.

 

Consulting a credit counselor might be a smart move if you’re feeling overburdened. A licensed counselor can assist you in making a budget and may even represent you in negotiations with collectors. The National Foundation for Credit Counseling can help you find reliable nonprofit credit counseling services. It’s also a good idea to see a lawyer or your local legal aid agency for guidance in more complicated cases.

Your Rights When Contacted by Debt Collectors

You should be aware of your rights when debt collectors contact you so that you may defend yourself and deal with the matter with assurance. Being aware of your rights during attempts at debt collection might help you feel less stressed and avoid being treated unfairly. Here are some things to be aware of:

 

1. You have the right to be treated with respect. Debt collectors must follow strict rules about how they communicate with you. They can’t threaten, harass, or use abusive language. If they do, you have the right to report them.
2. You can request validation of the debt. You can request documentation from the collector if you’re not sure if the debt belongs to you or if you need further information. You must get a written notification from them that includes the amount owed, the name of the creditor, and information on how to contest it.
3. You can dispute the debt.After the initial contact, you have 30 days to contest the debt if you think it is inaccurate or not yours. The collector must halt all collection attempts until they have confirmed the debt after you challenge it.
4. They can’t contact you at inconvenient times. Debt collectors are only allowed to call during reasonable hours, typically between 8 a.m. and 9 p.m. If you ask them to stop calling you at work or at certain times, they have to respect your request.
5. You have the right to privacy. Collectors cannot discuss your debt with others, like your employer or family members, except to confirm your contact information.
6. You can negotiate your debt. If the debt is valid, you can work with collectors to set up payment plans or settlements that fit your budget.
7. Debt collectors can’t lie to you. They must be honest about who they are and what they want. It’s illegal for them to threaten legal action they can’t take or claim you committed a crime.

How to Verify a Debt

Verifying a debt is an important step to make sure you’re only paying what you truly owe. If you’re contacted by a debt collector or unsure about a debt, here’s a simple way to request and confirm its legitimacy.

 

First, ask the debt collector for a written validation notice. This notice should include details like the original creditor’s name, the total amount owed, and how you can dispute the debt if needed. You have the right to request this within 30 days of first being contacted.

 

Next, review the information carefully. Check that the creditor listed is familiar to you and that the amount matches what you expect. If anything looks off or if you don’t recognize the debt, you can formally dispute it in writing. Once disputed, the collector must pause all collection efforts until they provide proof.

 

You can also contact the original creditor directly to confirm if the debt is valid and whether the debt collector is authorized to collect on their behalf.

 

Taking these steps helps protect you from scams or mistakes, and ensures you only pay debts that are legitimate. Always keep copies of your correspondence for your records. Verifying a debt before paying it gives you peace of mind and helps avoid unnecessary financial stress.

Dealing with Harassment or Threats from Debt Collectors

Remain composed and be aware of your rights if debt collectors are harassing or threatening you. Debt collectors are not allowed to threaten or mistreat you; they must treat you decently. Keep thorough notes of all calls and messages, including names and dates. They can only get in touch to confirm or alert you to legal action after you file a formal notice asking them to cease contacting you.

 

Report the collector to consumer protection organizations such as the FTC or CFPB if the harassment persists. It might also be beneficial to have legal counsel, particularly if the behavior is serious.Remember that a lot of groups provide free help, so you don’t have to do this alone. By remaining aware and taking action against pushy debt collectors, you can protect yourself.

Statute of Limitations on Debt Collection in the US

The statute of limitations on debt collection in the US sets a legal time limit for creditors to sue you over unpaid debts. This period typically ranges from three to six years, depending on the type of debt and your state’s laws. It usually starts from your last payment or when you last acknowledged the debt.

 

Debt collectors may continue to get in touch with you after this period has passed, but they are not permitted to file a lawsuit to compel payment. They have more time to file a lawsuit if they reset the clock by paying or pledging to pay.

 

Studying the statute of limitations in your jurisdiction might help you safeguard your rights and steer clear of unjust collection tactics. If in doubt, think about seeking advice from a consumer lawyer. You can handle debt collection with confidence if you are aware of these limitations.

Can Debt Collectors Garnish Your Wages or Bank Account?

Yes, but only after they sue you and get a court judgment. Once they have this, they can ask your employer to withhold part of your paycheck or freeze funds in your bank account to repay the debt.

 

Federal law limits wage garnishment to about 25% of your disposable income, and some states have even stricter rules. Certain funds, like Social Security or tax refunds, are usually protected from garnishment.

 

Be aware of your rights and think about getting legal counsel if you are being garnished. You can better manage debt collectors and safeguard your funds if you are aware of this.

Are You Legally Required to Pay a Debt Collector Immediately?

No, you’re not. Debt collectors can ask for payment, but you don’t have to pay right away or at all, unless a court orders you to.

 

You have the right to verify or dispute the debt before paying. If a collector sues and wins, then you may have to pay, but until then, you can negotiate or seek legal advice.

 

Taking your time helps you understand your rights and avoid rushing into payments.

What Happens If You Ignore a Debt Collector’s Calls?

Many people wonder if avoiding calls will make the debt go away, but unfortunately, it usually doesn’t. Ignoring debt collectors won’t erase the debt, and they may keep trying to reach you through calls, letters, or even emails.

 

Debt collectors may eventually choose to sue you in order to recoup the money due if you don’t reply. They could put a lien on your property, freeze your bank account, or garnish your salary if they are successful in court.

 

That said, you’re not legally required to answer calls or talk to debt collectors if you don’t want to. You can ask them to stop contacting you, but keep in mind this doesn’t eliminate the debt or stop legal action.

 

Ignoring calls can lead to stress and missed opportunities to resolve the debt, such as negotiating a payment plan or settling for less. It’s usually better to respond, understand your options, and work toward a solution that fits your situation.

 

In short, ignoring debt collector calls won’t make debt disappear and can lead to serious consequences. Staying informed and proactive is the best way to protect yourself.

Can You Settle a Debt for Less Than What You Owe?

Yes, many creditors and debt collectors are willing to accept a lower lump sum to close your account. Settling can save you money and stop collection efforts, but it may affect your credit score.

 

Always get the settlement agreement in writing to protect yourself and be aware that forgiven debt might be taxable. If you can’t pay in full, negotiating a settlement is a smart way to reduce your debt and move forward.

How Debt Collection Affects Your Credit Score

Missing payments and having your debt turned over to a collection agency can have a negative effect on your credit score. Here are some things to be aware of regarding the impact debt collection has on your credit:

 

• Debt Collections Appear as Negative Marks: Once a debt is sent to collections, it gets reported to credit bureaus as a collection account. This is a red flag for lenders, showing you didn’t pay on time.
• Significant Drop in Credit Score: A collection account can cause your credit score to drop sharply because payment history makes up a big part of your score.
• Collections Stay on Your Credit Report for Years: Even if you pay off the debt later, the collection record can stay on your report for up to seven years, continuing to affect your creditworthiness.
• Paying Before Collections Can Protect Your Score: If you catch up on payments before your debt goes to collections, you can avoid the bigger hit that a collection account causes.
• Settling Collections Can Help but Doesn’t Remove the Record: Paying off a collection stops new damage, and some credit scoring models ignore paid collections, but the history may still show up on your report.
• Harder to Get Credit After Collections: With a collection on your credit report, lenders may see you as a higher risk, which can make it tough to get approved for loans or credit cards and often means higher interest rates.

Tips to Protect Yourself from Debt Collection Scams

Debt collection scams are becoming more common, and falling for one can lead to serious financial trouble. Scammers often pretend to be debt collectors to steal your money or personal information. To keep yourself safe, here are some practical tips to watch out for and protect yourself:

 

• Verify the Debt Collector’s Identity: Always ask for the name of the company, a phone number, and details about the debt. Legitimate debt collectors will provide this information without hesitation.
• Request Written Verification: You have the right to ask for a written notice that details the debt amount, the original creditor, and your rights. Never pay or share personal info before you get this.
• Be Wary of Unusual Payment Methods: Scammers often ask for payment via wire transfer, gift cards, or cryptocurrency. Legitimate collectors typically accept checks or direct payments through secure channels.
• Don’t Share Personal Information Over the Phone: Never give out your Social Security number, bank account, or credit card details unless you have confirmed the caller’s legitimacy.
• Watch Out for Threats or Pressure Tactics: Real debt collectors won’t threaten you with arrest or immediate legal action. If someone pressures you aggressively, it’s likely a scam.
• Check Your Credit Report Regularly: Review your credit reports to spot any unfamiliar debts or collection accounts. This helps you catch potential scams early.
• Report Suspicious Calls or Messages: If you suspect a scam, report it to the Federal Trade Commission or your country’s consumer protection agency to help stop fraudsters.

Conclusion

To safeguard your rights and keep control of your financial circumstances, you must be aware of what debt collectors may and cannot do. Being aware of the boundaries of their behavior helps you steer clear of needless anxiety and possible fraud. Always keep in mind that you have the right to challenge debts, request proof, and establish limits, and that debt collectors must adhere to stringent guidelines when contacting you. 

FAQs about What Debt Collectors Can and Can’t Do

Q.1 What are debt collectors forbidden to do?

Ans: Debt collectors are forbidden from using harassment, threats, or abusive language. They cannot call at odd hours, disclose your debt to others, or lie about the amount owed. They also can’t threaten legal action they won’t take or falsely imply government involvement. These rules protect consumers under the Fair Debt Collection Practices Act (FDCPA).

Q.2 What’s the worst a debt collector can do?

Ans: The worst a debt collector can do is file a lawsuit against you to recover the debt. If you don’t respond, they may get a default judgment, leading to wage garnishment or bank account levies. Aggressive tactics like constant harassment can also harm your credit score and cause emotional distress.

Q.3 What is the 777 rule with debt collectors?

Ans: The “777 rule” means debt collectors must wait at least seven days after sending a written debt validation notice before continuing collection efforts. They can contact you a maximum of seven times within seven days. This rule helps prevent harassment and gives you time to review your debt.

Q.4 What are the 11 words to stop a debt collector?

Ans: The 11 words to stop a debt collector are: “Please stop contacting me. I refuse to pay this debt.” Saying this triggers your right under the FDCPA to halt calls. After this, debt collectors can only contact you to confirm no further communication or to notify about legal action.

Q.5 How to get rid of debt collectors without paying?

Ans: To stop debt collectors without paying, send a written cease communication letter requesting no further contact. You can also dispute the debt if you believe it’s incorrect. While this won’t erase the debt, it can halt harassment. Keep records and seek legal advice to protect your rights.