It’s National Consumer Protection Week and in a short while, our office will release our list of industries that received the most consumer complaints in 2010. I’ll give you a hint – there’s a good reason why today’s tip focuses on dealing with collection agencies and debt.
If you are struggling with credit card debt and haven’t yet met with a legitimate, nonprofit credit counselor, do it now. Credit counselors help you develop a personalized money-management plan. Pick a program with an office in your community. The U.S. Trustee Program provides a list of government-approved credit counseling agencies. The National Foundation for Consumer Counseling provides a list of member agencies online at www.nfcc.org or call 1-800-388-2227 for a 24-hour automated message with office listings. Compare a couple of services for costs and to get a feel for how they operate. Be aware that just because an organization says it is “nonprofit” doesn’t guarantee that its services are free or affordable.
DEALING WITH COLLECTORS
If you’re being hounded by calls from collection agencies, you should know that you have rights. State and federal laws require that debt collectors treat you fairly.
They can contact you three times a week – no more than that – but no calls before 8 a.m. or after 9 p.m. They can't call you at work if they know your employer prohibits it. If you don’t have an attorney, a collector may contact other people only to find out your address, your phone number, and where you work. [updated]
If you want the calls to stop, you need to write. Once a collector receives your letter, the law says the business can't call again except to notify you of legal action. And if an attorney is representing you about the debt, the debt collector must contact the attorney instead of you.
Banks and businesses collecting for their own accounts are exempted under Washington State’s Collection Agency statute, however.
CAN THEY SUE ME?
If you don't pay your bills, you can be sued. If you are sued over a debt, don't ignore it. A default judgment could be entered against you, allowing the creditor or collector to garnish your wages. You can have bigger problems if you fail to appear in court -- people have been jailed.
Consumers occassionally ask me about "zombie debts," also known as time-barred debts. Basically, they’re debts that are so old they are beyond the point at which a creditor or collection agency may sue you to collect. Collection agencies typically have six years to seek an outstanding payment; that’s when Washington’s statute of limitations to sue expires. If the consumer makes a payment within the six years, the clock starts ticking again. According to the Federal Trade Commission, most courts that have addressed the issue have ruled that the Fair Debt Collection Practices Act does not prohibit debt collectors from trying to collect time-barred debts — as long as they don't threaten to sue you. If a debt collector sues you to collect a time-barred debt or one that has been discharged through bankruptcy, you can have the suit dismissed.
PROGRAM TO REDUCE YOUR DEBT
Many companies promise to help you reduce the amount of debt you owe. But be careful about where you seek help. Last week, we announced a settlement with a company called Freedom Debt Relief concerning allegations that the company charged customers more than the state’s Debt Adjusting Act allows and sometimes failed to adequately inform them about how the program works.
Recent changes to the federal Telemarketing Sales Rule prohibit companies that sell debt relief services over the phone from charging a fee before they settle or reduce your debt.
Debt consolidation programs offered by legitimate credit counselors can be helpful to some consumers. These programs combine your existing debts into a single loan with a lower interest rate. You deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees if you’re working with a reputable program, but it can still take several years to complete the program.
But watch out for debt negotiation programs that claim they can work out a deal with your creditors to lower the amount you owe. These programs can be risky and may have a negative impact on your credit report and, in turn, your ability to be approved for new credit. Additional risks exist if you are unable to save enough money to satisfy your creditors or are successfully sued and your creditors garnish your wages.
Remember, the best way to avoid calls from collection agencies is to pay your bills on time. Outstanding debt can lower your credit score, which lenders use to determine if you’re a good risk for a car loan, mortgage or credit card.