Tennessee Consumer Rights When Sued by a Collection Agency

The Consumer Credit Protection Act protects the rights of a consumer sued by a debt collection agency in Tennessee and other states across the country. This law caps the amount of money a collection agency or creditor may pursue through wage garnishment, allowing a consumer to keep funds necessary to meet living expenses. Each state, including Tennessee, also sets a statute of limitations providing a set amount of time a creditor has to legally collect.

Statute of Limitations

The statute of limitations for debt collection in Tennessee is six years for all written contracts and open accounts. The most common debts associated with these types of accounts are credit cards, personal loans, lines of credit and medical bills. A collection agency has this amount of time to legally sue a debtor in civil court. If a collection agency sues a debtor after the particular statute of limitations expires, the debtor gains a legitimate defense. The debtor simply makes the court aware of the time-barred status of the debt and the court dismisses the case. The court may also bar the collection agency from bringing future suits against the debtor for this particular account.

Wage Garnishment Rights

Wage garnishment is legal in Tennessee. This means a collection agency winning a judgment against a debtor could file to garnish wages for the payment of a debt. The state follows federal guidelines for wage garnishment allowing a creditor to seize up to 25 percent of a debtor's disposable weekly income or the equivalent of 30 times the federal minimum wage in weekly income---whichever is less. Tennessee law allows a collection agency with a domestic judgment up to 10 years to recoup the debt in question.

Maximum Interest Rates

State law caps the interest rate a creditor or collection agency may charge a debtor when collecting on a judgment resulting from a lawsuit. According to BCS Alliance's website, as of June 2011, the interest rate a creditor or collection agency may charge on debt collection caps at 10 percent or the specific rate of the original contract. This means the interest tacked on to a judgment resulting from a lawsuit could be higher than 10 percent if the debtor originally agreed to a higher amount when he received the loan or line of credit.

Negotiating Payment Terms

A consumer sued by a collection agency in Tennessee or other states in the country may be able to lower judgment and garnishment amounts by claiming the seizures of funds leaves too little to support essential life activities. For example, a construction contractor needs enough income to purchase equipment and operate her business. Additionally, federal law protects an employee from retaliatory termination for any judgment, including wage garnishment, brought for a single debt.