Consumer debt is taken on by individuals to buy homes, cars, higher education and for personal spending. The borrower has a legal obligation to repay their debt unless they go through bankruptcy. However, consumer debt laws focus equally on the consumers rights and the debt collectors obligations.
Validation of Debts
Consumer debt laws state that the collector must send the consumer a validation notice. If the consumer does not reply within 30 days of receiving the validation notice, a court will assume the person is not disputing the debt, which makes it valid. The consumer must dispute the validation notice in writing within 30 days to be able to challenge it in court.
Communication Limitations on Collectors
Federal and state consumer debt laws state that collectors must send a validation notice to the debtor stating how much is owed and to whom within five days of contacting the consumer. They must also provide a full listing of the amount due, fees, interest and penalties to the consumer upon request. Collectors can send unlimited letters to the consumer regarding the debt. However, they cannot contact family members or neighbors to pressure the consumer to pay. Collectors are not allowed to threaten violence or criminal penalties for non-payment of debt. Consumers can report harassing or illegal conduct by collectors to the Federal Trade Commission.
Laws on Contact by Collectors
According to the Fair Debt Collection Practices Act, the debt collector cannot call the debtor before 8 a.m. or after 9 p.m. The debt collector cannot call them at work if the consumer has said their employer does not permit personal calls. The consumer can request to stop receiving any collection calls at all. However, the collector can still continue to send collection letters if all phone contact ends.
Consumer Debt Laws on Marriage and Divorce
After marriage, both individuals are liable for debt taken out by either spouse or both spouses jointly. After divorce, the debt taken on during marriage can be collected from either or both former spouses. The Equal Credit Opportunity Act or ECOA states that if a divorced individual seeks a loan and lists alimony in their income on which they can repay the debt, the lender can ask for divorce forms that prove the alimony amount. However, if alimony is not listed as income for loan purposes, that paperwork cannot be required by the lender. Furthermore, if one individual of a divorced couple applies for a new loan, the former spouse is not liable for their debts.
Rights of Lenders
Consumer debt laws also protect the rights of lenders. If a consumer fails to make payments on their loan, the lender with a secured loan can repossess the collateral. For example, the bank holding the auto loan can repossess the car. The mortgage lender can file for foreclosure after several months of nonpayment. If the borrower has requested that all debt collection contact cease, the debt collector still has the right to sue for the unpaid debt.
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