California Law on Stopping Debt Collectors

California law gives residents the right to stop collections when a collection company can't verify a debt they supposedly owe. The law also allows Californians to restrict a collector's contact with them. Residents can't stop collection actions for debts they legitimately owe, so it's unwise to ignore collection notices for legitimate debts.

Paid Debts

California's Fair Debt Collection Practices Act prevents debt collection agencies from continuing collection efforts if Californians dispute a debt that a collector can't verify. According to the California attorney general's office, residents need to respond in writing within 30 days of receiving their first collection notice to dispute a debt. People who have already paid off a debt that a company is trying to collect should send copies of canceled checks or other documents that show they paid the debt in full. A collector has to stop contacting a resident after receiving a letter that disputes a debt, unless the collector can reply with information that verifies the debt is legitimate.

Wrong Debtor

Residents who believe a collection company is trying to collect a debt from them that isn't theirs also should respond to the first collection notice within 30 days and explain that the debt isn't theirs. The attorney general's office indicates that a collector may ask that a resident provide a driver's license or Social Security number to prove that the collection company is contacting the wrong person. A collection company must stop contacting a resident if it can't prove it's holding the right person responsible for paying the debt.

Collector Contact

State law also allows California residents to tell collection agencies to stop contacting them whether they owe the debt a collector is pursuing or not. Residents also have the option of telling a collector to contact them only by mail. People who don't want a collector to contact them at work can stop contact at their workplace as well. In any case, residents need to send a written request to a collection company to tell the company to cut off its contact with them. One risk of cutting off all contact with a collection agency is that the agency may decide to sue you to recoup a debt, since it can't contact you about repayment.

Considerations

It's sometimes difficult to get out of a collection agency's system even if it can't prove that you owe a debt you have disputed. The attorney general's office indicates that uncollected debts may go back to the original creditors or lenders. The problem for consumers is that companies sometimes resell uncollected debts to other collection companies. Therefore, an unverified debt may go to another collector, and a consumer will have to start the dispute process all over again to stop collection efforts.

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How to Dispute a Debt With a Collection Attorney

Under the Federal Trade Commission, consumers have the right to dispute debts, even if the collection is facilitated through an attorney. Disputes must be made in writing within 30 days of the collection attorney's initial notice of an attempt to collect the debt. The National Association of Retail Collection Attorneys advises consumers to respond quickly to collection efforts. Ignoring collection efforts can lead to further legal action. Common reasons for dispute include validity or balance discrepancies.

Instructions

1

Write a letter to the collection attorney disputing the debt. Templates are available on the Federal Trade Commission website.

2

Reference the case number and original creditor information. If correspondence from the collection attorney does not contain this information, contact the office.

3

State the reason for dispute.

4

Request that further contact from the collection agency be made in writing. This eliminates repeated phone calls requesting payment, and provides written communication for your records.

5

Attach additional documents to support your dispute, if applicable.

6

Make a copy of the letter and copies of any additional documents that you are sending.

7

Send the original letter and copies of supporting documents to the attorney certified with return receipt requested. Retain a copy of the letter with any support originals.

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The Collection Process for Delinquent Credit Cards

When a credit card company cannot successfully collect a delinquent debt through calling and sending written notices to the debtor, it will sell the defaulted debt to a collection agency. Most credit card companies sell debts to collection agencies after 180 days.

Significance

Collection agencies use the same debt-recovery methods as credit card companies, but are typically more aggressive in their efforts. Should letters and telephone calls to the consumer fail, the collection agency has the option to file a lawsuit against the debtor for the defaulted credit card balance -- plus the collection agency's fees. Many collection agencies also report collection accounts to the credit bureaus.

Time Frame

A collection agency may only sue for a debt as long as the debt is within the statute of limitations for debt collection in the debtor's state. Each state has a different statute for debt collection lawsuits. If the company sues and wins the lawsuit, the court may award it permission to garnish the debtor's bank accounts or wages.

Considerations

When conducting collection activity, debt collectors must abide by the Fair Debt Collection Practices Act (FDCPA). Violations of the Act include threatening debtors, lying to debtors about their accounts or the creditor's intentions and discussing the delinquent debt with anyone other than the debtor or his attorney. Consumers may sue debt collectors that violate the FDCPA.

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What if My Defaulted Student Loan Was Consolidated After a Tax Refund Was Offset?

When you consolidate your student loans, you are combining multiple loans you received over multiple years into one loan. If you consolidate your defaulted student loan after a tax refund offset, the U.S. Department of Education will apply the amount of your tax refund offset to any one of your outstanding loan balances.

Student Loan Defaults

Federal student loan defaults can result in some of the most severe consequences of any type of credit default. The U.S. Department of Education can intercept your federal tax refund checks, garnish your wages, including regular Social Security benefits, and place a lien on your bank accounts. Defaulting on a federal student loan prohibits you from obtaining additional federal financial aid or a loan insured by the federal government such as a Federal Housing Administration-insured mortgage.

Tax Refund Offsets and Garnishment

A tax refund offset is one remedy the Department of Education uses to collect on unpaid federal student loans. Private creditors must file a civil suit against you before they can pursue a state tax refund offset; private creditors may not offset your federal tax refund. Both state and federal tax refund checks are subject to offset for federal debts, such as those for federal student loans from the Department of Education. The department can also garnish your wages to collect on your defaulted student loans without filing suit.

Consolidation After Default

If you consolidated your student loan after the department had your tax refund offset, you are not entitled to receive that portion of the refund back; instead it is applied to your outstanding loan balance. Once you enter into a consolidation program with the department and make three on-time payments, your loan will be current and no longer in default. Once your loan is current, the department will not submit an Administrative Wage Garnishment order to your employer to garnish your wages or pursue tax refund offsets to pay toward your student loan debt.

Statutes of Limitation

No statutes of limitation apply to the collection of defaulted federal student loans. This means that should you default on your federal student loans after you consolidate and bring them out of default, the department can again offset your tax refund until your debt is repaid in full.

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How to Check Bad Credit Ratings

If you've been turned down for credit, it's probably because you have a bad credit rating. Lenders check your credit rating every time you apply for credit. The more you apply and get turned down, the worse your credit rating gets. Get a copy of your credit reports regularly, so you can check if you have bad credit ratings and see areas where improvements can be made.

Instructions

1

Get a copy of your three credit reports: Experian, Equifax and TransUnion. Apply online at the AnnualCreditReport website. You can get your reports free once a year. Follow the easy online instructions to view your reports instantly and check for bad credit ratings.

2

Print a copy of each report. It makes it easier to check through and highlight areas of concern. Check each section of the report. The first few sections list your personal details, employment history and summarize your credit history. Read through the credit history section: it will give you an overview of areas where you may have bad credit ratings.

3

Go to the payment history section (usually section 9). This section shows the status for each line of credit. The right side of the section shows a series of numbers and letters. These relate to your payment history. The numbers run from 0 to 9 where 0 means payments are up-to-date and 9 means your account has been passed for collection or possible bankruptcy. Numbers 1 to 6 determine late payments. Code 1 indicates 30 days late while 6 indicates 180 days late. Check for late or missed payments as these create a bad credit rating.

4

Check the letter next to each line of credit. The letter C or * means the account is good. Other letters and there meanings include: G, collection, H, foreclosure, K, repossession. The number and letters combined are used to work out your suitability for credit. The code G6, for example, means the account is in arrears by 180 days and is due for collection proceedings. Codes other than C0 or *0 are likely to result in a bad credit rating.

5

Check the remaining sections of the report. These show accounts that have gone for collection or details of civil actions: both result in a bad credit rating.

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About No Credit Check Long-Term Loans

Long-term loans without a credit check are a good idea for people who have poor credit. They also may be sought by people who want a quick and easy loan transaction with minimal paperwork and process.

Types

Secured installment loans are often available without a credit check. With secured loans, you place money in a bank or credit union savings account. The bank holds the money as collateral, eliminating all risk for the bank. With the guarantee in place, the bank may waive a credit check. You can also take out long-term loans without a credit check by borrowing from your 401K or another retirement plan. No credit check is necessary because you're borrowing your own money. Long-term loans from friends and family also usually don't require a credit check.

Benefits

No-credit-check, long-term loans, such as those taken against retirement accounts, may not be reported to credit bureaus. People who want to avoid the appearance of taking on more debt may see this as an advantage.

Warning

Long-term loans that don't require a credit check may not show up on your credit report--but they still result in additional debt. Taking out several no-credit-check, long-term loans could compromise your financial situation and lead to excessive debt.

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Can a Bank Take Money From a Checking Account If You Defaulted on Your Credit Card?

A bank can take money from your checking account to cover a defaulted credit card debt that you legally owe -- but only after being authorized by a judge. The bank must file a civil lawsuit against you, win a judgment in court and then ask the judge for permission to take money from your account.

Identification

The legal process used to take money from bank accounts is called garnishment. A devastating recession and U.S. housing bust starting around 2007 helped lead to an increase in garnishments, according to a 2010 story in The New York Times. The Times reported that garnishment was up 121 percent in the Phoenix area since 2005 and up 55 percent in the Atlanta area since 2004. Garnishments increased by 30 percent in Cleveland in just one year -- 2008 to 2009. No national figures were available, the Times reported.

Expert Insight

Some people learn that their checking account has been garnished only after having checks bounce or a debit card charge declined. According to the Times, some people never receive court papers notifying them of a lawsuit and fail to show up in court. That can lead to an easy default judgment for the bank, followed by a court order for garnishment. A notice of a lawsuit, called a summons, is usually hand-delivered to a person's home or business. However, the Times reports that some people employed to deliver summonses fail to deliver the documents and then doctor the paperwork to indicate that the person was served. The U.S. Department of the Treasury reports that notices of garnishment orders are usually mailed after a court decision is made.

Considerations

Banks are obligated by state laws to cooperate with garnishment orders, according to the U.S. Department of the Treasury. The garnishment can last until the debt is paid, but certain deposits in your bank account can be exempt from garnishment, including Social Security benefits.

Effects

Bank garnishment can be devastating financially, especially for people who are struggling to make ends meet. Many turn to bankruptcy, which stops garnishment while finances are reorganized through the bankruptcy court.

Warning

Avoid debt-related bank garnishment by paying your bills on time. If you do default on a credit card, contact the credit card company or debt collector to work out a payment plan or settlement. Debt settlement allows you to pay the balance for less than the full amount owed and can help avoid a lawsuit.

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