Dealing With Creditor Harassment: Know Your Rights
Being in debt and in credit collection is stressful enough. But when your creditors start bombarding you with letters, harassing you with phone calls, and even making threats, it can be downright terrifying. It’s crucial that you know your rights, take quick action to assert them, and communicate to your creditors the unacceptable nature of their collection practices.
The Consumer Credit Protection Act (CCPA) is the biggest and most multiuse weapon in your arsenal. Let’s look at some of the subchapters and acts of the Consumer Credit Protection Act.
The Fair Debt Collection Practices Act (FDCPA)
This act gives you the legal power to stop collection agencies from contacting you altogether. It’s important to note that this act does not apply to the company that originally loaned you the money, but only an outside company or person it turns the account over to for collections.
In addition, the FDCPA outlines a number of other rules that collection agencies must live by or they become open to a lawsuit:
- In their efforts to collect a debt you owe, a collection agency may not contact your family, friends, neighbors, or employer.
- Collection agencies are not permitted to call before 8 A.M. or after 9 P.M. in your time zone.
- Use of racial slurs, obscenities, insults, or unreasonable threats is out of the question.
- No collection agency or its employee can pretend to be an attorney or court employee, or create any communication that would look like it came from one.
- No collection agency can threaten you with arrest for an unpaid debt.
To wield the mystical power of this act, all you need to do is send a simple cease and desist letter to the collection agency stating that you no longer wish to be contacted about this debt. If you have hired an attorney for bankruptcy proceedings or a lawsuit regarding the debt, you can instruct the collection agency to contact them.
Sample cease and desist letter.
The Fair Credit Billing Act (FCBA)
This set of laws protects users of credit cards and department store charge cards from bogus charges, double charges, math errors on their statements, and changes of addresses that caused your payment to be late. It gives you the right to be late on a payment, without any penalty or negative credit reporting, if you believe one of these situations has occurred.
Once you provide your credit card company with a written billing dispute letter, you may withhold payment on the amount in dispute until the dispute is resolved. You must, however, pay all the other charges that are not in dispute.
To receive protection under the FCBA, you must mail the written dispute to your credit card company’s billing inquiry address, which is usually different than where you send your payments. Also, your dispute letter must reach them (not just be mailed) within 60 days of receiving the bill with questionable charges, so it’s best to send the letter by registered mail or some type of traceable service like FedEx or UPS.
Your credit card company must then acknowledge your dispute within 30 days, and completely resolve the dispute within two billing cycles (about 60 days). If they fail to abide by the FCBA, you can sue your creditor for damages, twice the finance charge you paid, and your legal fees.
In addition to providing a process for disputing charges, the FCBA provides the following protections:
- If your company charges late fees on payments, they must send you your statement at least 14 days before your payment is due. If not, you can dispute the late fees associated with that payment cycle.
- Your credit card company must credit your payment on the business day it is received. In other words, they would violate the FCBA if they received your payment on the 30th, a day before your payment is due, but do not credit you until the 2nd.
- If your credit card ever has a positive cash balance, usually caused by you overpaying, your credit card company must promptly refund the balance if it is greater than one dollar.
Restriction on Garnishment Act
The biggest protection provided by this act has to do with how much of your paycheck can be garnished. In other words, the government protects your right to work and earn enough money to provide for you and your loved ones. While many large companies are aware of these guidelines, smaller employers may not have a clue, requiring you to assert your rights.
The maximum amount that can come out of each paycheck is the lesser of 25 percent of your disposable earnings or the amount by which your wages exceed 30 times the federal minimum wage. This limit is increased to 50-65 percent in certain child support and alimony cases. The maximum is decreased to 10 percent for certain federal student loans in default. IRS and bankruptcy garnishments are not subject to these limits.
Another protection is that your employer is not allowed to fire you because of a garnishment action as long as the action only results from one debt. However, if garnishments are ordered because of two or more debts, the Restriction on Garnishment Act doesn’t prohibit your employer from firing you. Yet another reason to communicate with your creditors and work hard to keep your debts out of collections and garnishment.
Truth in Lending Act (TILA)
If you were sold a mortgage that was not properly explained and now has a payment spiraling out of control, you may be able to undo your bank’s claim on your house. It’s still a creditor you owe money to, but the bank has to get in line with all the rest of your unsecured creditors.
Since the subprime mortgage meltdown, many borrowers have sued and won the right to remove their bank’s claim on their house. Many have also won the right to collect monetary damages, because their lender didn’t adequately disclose the risks of their adjustable-rate mortgages.
If you think that this might be you, you’ll need to gather all your original paperwork for your mortgage and contact a lawyer specializing in litigating these kinds of cases. But if you had a mortgage pushed on you by a slick broker, a few phone calls may well be worth your time!
Predatory Lending Laws
In response to the trend of excessively greedy people and companies that take extreme advantage of unaware consumers by offering a high-rate or high-fee product to people who might not otherwise know better or have other options, many states have enacted predatory lending laws. In fact, 25 states now have some kind of laws on the books to prevent predatory lending.
While many of these laws may not place an immediate stop to your debt crisis, the loans that dug you into the hole may actually offer you a ladder out. Spend some time online researching your state’s predatory lending laws, as well as visiting the website for Housing and Urban Development (HUD). As always, seek legal advice if you think there has been a gross violation of your rights.
Reporting Violations of Your Rights
While reporting violations of your rights is unlikely to result in as much immediate action as contacting the company directly or getting a lawyer involved, a phone call may help point you toward other resources for dealing with the same company. Any violations of the Fair Debt Collection Practices Act should be reported to the Federal Trade Commission at 1-877-382-4357.
Armed with this knowledge, you can stop collection agencies from harassing you and put yourself in a better position to get out of debt. It may sometimes be scary, but knowing that the law is on your side and knowing your rights can make the process less stressful. Good luck!
From The Complete Idiot’s Guide to Getting Out of Debt by Ken Clark, CFP
