State Laws for Collection of Credit

Most people dislike dealing with debt collectors. Debt collectors, while legally entitled to attempt to receive past due payments, sometimes engage in disreputable activities, including telling falsehoods and impersonating federal agencies. While each state has its own unique laws regarding credit collection, most state guidelines follow those set forth by the federal government.

Types

There are two different types of debt collections. The first debt collection comes from the originator. In most cases, state laws actually pertain to the original debt collection. When it comes to other parties, such as debt collection agencies, the Fair Debt Collection Practices Act provides guidelines and protection on a federal level.

FTC

The Federal Trade Commission is charged by the federal government with protecting consumers from debt collectors engaging in illegal or abusive acts when attempting to collect a debt. The authority to take action comes from the Fair Debt Collection Practices Act and allows the FTC to go after debt collectors who break the law, including employees of collection agencies, as well as attorneys specializing in debt collection. While states go after debt collectors violating state laws, the FTC prosecutes debt collection violations under federal law.

Scavengers

Sometimes debt collectors sell off old uncollected debts. Scavenger debt collectors buy these. The scavenger debt collectors contact the delinquent account holder, attempting to collect on those old debts. If the statute of limitations for the state has expired, the debtor does not have to pay the debt. Scavengers threaten to sue for payment, even after the statute of limitations expires. While it is possible to actually file suit, a judge can dismiss the lawsuit upon being presented with proof of the expiration. When the statute of limitations begins to run out, it is not unusual to receive contact from a debt collector attempting to receive payment before the debt expires.

Prosecution

Debt collectors engaging in illegal activities face criminal prosecution, as well as loss of business licenses and compensatory fines. If a debt collector misrepresents himself as being part of a federal or state agency or if the debt collector threatens to have a debtor arrested because of an outstanding debt, this violates federal and most state laws. If a debt collector, in violation of state laws, is harassing a person, the debtor should contact his state's attorney general's office.

Changing Technologies

Since the FTC remains unable to address new technologies, such as cellphones, voice mail and email, a new agency called the Consumer Financial Protection Bureau exists to handle changes in the way debt collection occurs. The bureau has the authority to write new laws and to go after debt collectors violating either federal or state credit collection laws.