Collection Laws

• Due to repeated consumer complaints of harassment by debt collectors, the U.S. government passed the Fair Debt Collection Practices Act, or FDCPA, in 1978. The FDCPA governs how and when debt collectors may contact consumers, notes the legal rights both collectors and consumers possess in regards to lawsuits and prohibits the collection industry's use of certain techniques the government considers unfair and misleading. Two examples of unethical collection methods noted by the FDCPA include collecting debt via postcard and claiming that the collection agency is not a debt-collection company in order to obtain a debtor's personal financial information.
  
  

Debt Collection Lawsuits

• Debt collectors cannot swear at you, threaten you with physical violence or call you in the middle of the night. Debt collectors can, however, sue you. While you have the right to defend yourself, failing to do so or losing the case leaves the collection agency in possession of a money judgment it can use to levy your bank accounts. A creditor with a money judgment also has the right to attach a lien to your home or car and garnish your wages.
  
  

Debt Validation

• Collection agencies must validate your debt upon request. The FDCPA requires that the company provide the debt validation in writing. The FDCPA does not state which documents constitute validation but, should you request proof, all collection efforts must cease until the collection agency provides you with documentation demonstrating it legitimately owns the debt and you owe it. If you request contact information for the account's original creditor, the collection agency must also provide you with the name and address of the account's original creditor.
  
  

FDCPA Violations

• The FDCPA holds collection agencies responsible for ensuring that their employees closely follow the act's provisions. In the event a collection agent violates the FDCPA, the victim has one year to file suit against the company. Victims of FDCPA violations can also report these violations to the Federal Trade Commission, which regulates business practices in the U.S.
  
  

Credit Reporting

• If your creditor transfers an unpaid debt to a collection agency, you can expect your credit score to decrease as a result. Collection accounts indicate an unwillingness to pay debts or an inability to properly manage money. All collection notations on your credit file are derogatory. Even if you pay off your old debts, the collection account stays on your credit record for seven years.