Debt collection agencies recover large amounts of money each year from debtors, but because of the unethical practices of some agencies, confusion exists about what procedures agencies can use. Legally, you have some protection against unethical practices. Debt recovery agencies are limited on what they can do to recover debt. They sometimes use unethical and illegal practices, because not many people know the laws of debt recovery and are not aware of their rights.
Letters
A letter is the first mode of communication between the agency and the person owing money. This letter includes the amount owed, original creditor and its contact information. The agency may claim that "further collections efforts" will be initiated, which may mean more letters and phone calls are coming. Though the letters may contain threatening language, agencies typically cannot follow through with their threats.
Phone Calls
Should letters not get the desired result, agencies call you at home. They are not allowed to call between 9 p.m. and 8 a.m., and they cannot call your place of employment if it is against the company's rules. Their main goal for calling is to come up with a solution for resolving the debt---whether they get the payment in full or establish an agreement to a payment plan.
Negotiation
During this entire process, debt collection agencies' purpose is to collect a debt for their clients. They usually try to negotiate with you and have you repay the debt. Knowing your rights can help you negotiate payment terms.
Reporting
Credit bureaus receive reports of any communication attempts on this debt, which stays on your credit report for at least seven years. Any new credit applications could be denied depending on how you deal with this debt. However, agencies are not obligated to report any settlements on your credit history, which means you must take care of this. Review your credit report once a year, and contact the credit bureau to dispute any debts you have settled but do not show up on your report. If necessary, provide proof of settlement, such as a letter or cancelled check.
Limitations
Debt recovery agencies are limited in what they can do. For example, people may believe agencies can sue them for the amount they owe, which is not true. To create a lawsuit against someone, the agency would have to own the debt, or the debt must be $2,000 or more. They cannot threaten to have you arrested based on non-payment of debt, nor can they use false information to recover a debt. This is not intended as legal advice, and you should contact an attorney for legal advice.
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