Ever have a debt collector repeatedly hassle you over a debt that you know was settled, or wasn’t yours in the first place? The reason why could be a loophole that allows debt collectors to approach people again and again over the same contested debts. By trying to collect again and again, collectors can waste your time, negatively affect your credit score and, sometimes, intimidate people into paying debts that they don’t owe.
How Debt Laundering Works
Under the Fair Debt Collections Practices Act (FDCPA), there are clear rules about how debt collectors can act. They are required to cut off communication with a consumer if the consumer alerts the collector that they are represented by an attorney. They must cease most types of communication once informed in writing that a consumer does not wish to receive further phone calls or letters. They must respond with legitimate evidence or cease communication when a consumer files a dispute or asks for proof of a debt. But, debt collectors have found a way around this by simply selling the debt to someone else.
The cycle of communicating with a debt collector starts all over once a different collection company is handling the account and is considered Debt Laundering. As a result, many people are harassed with the same debts over and over, even after going through all the motions with someone trying to collect the debt.
The scenario can wind up playing out like this: Sally Consumer is contacted by a debt collector who says that she owes $400 on an old phone bill. As a savvy consumer, Sally demands proof that the debt is hers. The way the law is intended to work, the debt collector has to either provide proof or stop pursuing the debt. But, by cycling the debt through another collection agency, the process starts all over again.
How to Deal with a Debt That Won’t Die
If you are receiving phone calls and letters about a debt that is not yours, remember that you have rights. When confronted with an aggressive debt collector:
1. Ask for validation of the debt. By law, the collector must send a validation notice that says how much you owe within five days of their first contact with you.
2. Notify the collector, in writing, that the debt is not yours. Do not try to settle this over the phone; the notification must be written to work. You need to send the letter within 30 days of receiving the validation. Once you have sent a letter stating that you do not owe the debt, the debt collector cannot continue to collect the debt unless there is proof that it is yours.
3. Stand up to harassment. Debt collectors cannot call you at work after being told not to, whether you convey this over the phone or in writing. They cannot call outside of regular hours, such as before 8 am or after 9 at night. They cannot threaten you with violence, use vulgar language or repeatedly call you for the purpose of annoyance.
4. Keep records of everything. Keep a small calendar specifically for contacts from debt collectors. Make a note of any phone calls or mail. Keep copies of the letters you send and the ones that you receive. This can help you go through the process of responding more quickly if your debt is passed from one collection agency to another. It can also help you see when a debt collector is violating the FDCPA. These sorts of financial records are also valuable to show yourself how far you have come in your credit repair efforts.
5. If necessary, begin legal enforcement of your rights. If a collection company is violating the law and harassing you, you can sue them in state or federal court. A just can require a collector to pay up to $1,000, even if you have suffered no monetary damages. Your state’s Attorney General’s office and the Federal Trade Commission should also be notified if you are being harassed about a debt. Often, the debt collector is violating the rights of other consumers, as well.
More Legal Protection Coming
Consumer advocates are not impressed with the practice of passing around a contested debt until one credit collection agency finally has success. The National Consumer Law Center has recommended that consumer information about debts be required to travel with those debts when they are sold to a new collector. And, every collector should be held responsible for past actions on a debt.
In late 2013, the Consumer Financial Protection Bureau announced that it would consider new debt collection rules, including rules that will put limitations on the try, try again approach. While we wait for legal remedies, consumers must protect themselves against unfair collections. Do not be afraid to advocate on your own behalf and know that you have the weight of consumer protection laws on your side.
For additional information on the debt laundering loophole and on how to deal with deceptive debt collectors, feel free to call our office at 617-265-7900 or schedule a free consultation below.