As the recession lingers on, many consumers are having financial difficulties. High unemployment, increased interest rates on credit cards, and upside down mortgages are just a few of challenges taking their toll on Americans. If you are one of the millions of Americans that have fallen behind in your bills, then you have probably had to deal with creditors and debt collectors.
Let's discuss 3 debt laws that will protect you when are working with a creditor or debt collector:
- The Fair Debt Collection Practices Act
- Statue of Limitations on Debt
- The Fair Credit Reporting Act.
The Fair Debt Collection Practices Act
Enacted in 1977, this act offers protection for consumers when working with debt collectors and requires them to treat you fairly with regard to your debt. Even though you owe a debt, you should know that you still have rights when debt collectors contact you.
- A debt collector can contact you in person, by mail, phone, fax, or telegram. However, they cannot contact you before 8am or after 9pm, unless you agree to be contacted outside of those times. They also cannot contact you at work if you tell them you cannot take personal phone calls at work.
- If you have hired an attorney to represent you about the debt, the collector must contact the attorney and not you. If you do not have attorney representing you, then they can call other people to find out your address, your phone number, and place of employment.
- A debt collector may not harass, make false statements, or abuse you in any way when they contact you. They cannot call you repeatedly in a day, use profanity, or threaten violence to get you to pay the amount owed.
- They cannot lie to you about how much debt is owed, nor can they tell anyone else that you owe money.
- This law also provides the consumer the right to sue a debt collector for violations of this law.
Statute of Limitations on Debt
Another law to know regarding debt is that there is a statute of limitations for debt collecting. This is similar to an expiration date for collecting a debt. The statute of limitations begins on the last date of activity on the account and is normally between 3 and 10 years, but it varies by state. This law prevents a creditor from pursuing a debt indefinitely. Some debt collectors will still try to collect a debt past the statute of limitations, hoping you won't know your rights.
Before you agree to pay an old debt, make sure that the statute of limitations hasn't expired. If it has expired, then you might not have to pay the debt. If you take any type of action on an expired debt, such as a payment agreement or making a payment, then the statute of limitations restarts all over again. It is important to know what the statute of limitation is for your state before you talking to a debt collector.
As with all laws, there are some exemptions to the statute of limitations. Some debts do not have a statute of limitations. Those are federal student loans, child support in some states, and income taxes. And remember, the statute of limitations doesn't erase the debt. If the debt is yours, you still owe it and it will remain on your credit report as long as the credit reporting time limit allows (and will continue to have negative consequences for you in things like car insurance rates, low interest rates, etc.)
The Fair Credit Reporting Act
This law requires that all information included in your credit report is accurate and also promotes the privacy of the information contained in your credit report. The basics of this law include:
- You must be told if there was information from your credit report used against you if you were denied credit, insurance, or employment. This includes what the information was and the name, address, and phone number of the agency that provided it.
- You have the right to know what is in your credit report. You can get this information free if an adverse action was taken against you due to the information in your file.
- Consumers are also entitled to a free credit report every 12 months upon request from each of the 3 national Consumer Reporting Agencies, which are Experian, TransUnion, and Equifax.
- You have the right to know your credit score. In most cases you will have to pay to obtain your credit score.
- You have the right to dispute inaccurate information on your credit report. Report the inaccuracy to the credit bureau that includes it. They are required to investigate it.
- Credit bureaus must remove or correct inaccurate information within 30 days after verification.
- Credit reporting agencies cannot report negative information older than 7 years or bankruptcies more than 10 years.
- Information on your credit report is limited to only those with a valid reason, such as a creditor, insurer, employer, or landlord.
- An employer or potential employer must have written consent from you to obtain information from your credit report.
- You also have the right to seek damages from anyone who violates the Fair Credit Reporting Act. This includes the consumer reporting agency, a user of the reports, or anyone who furnishes information to the agency.
Federal Trade Commission
The Fair Debt Collection Practices Act, Statute of Limitations on debt, and The Fair Credit Reporting Act are federal laws enforced by the Federal Trade Commission (FTC). These laws are the base of consumer credit rights in the United States.
The Federal Trade Commission was created to ensure debt collectors and credit reporting agencies are following specific guidelines when it comes to working with the consumer and not taking advantage of their rights while attempting to collect a debt. They were also designed to govern how collectors can collect a debt, how long they can attempt to collect a debt, and what information is included in your credit report and how it is used.
If you must work with a debt collector, be certain to understand your lawful rights. If you feel that your rights are violated, you can file a claim with the Federal Trade Commission within one year from the date the law was violated. However, even if you are awarded with compensation, the debt does not go away if you owe it.