Despite the upturn in the economy, more than one-third of Americans last year defaulted on debts and bills that later went into collections, which means many of those people were probably hassled by a debt collector.
It’s not exactly busting the kneecaps of deadbeats, but overaggressive debt collecting has become a huge problem - sometimes for people who don’t even owe a debt.
"Debt collection constitutes one of today’s most important consumer financial concerns," Richard Cordray, director of the Consumer Financial Protection Bureau, said in a report this year. The largest source of complaints every month at the bureau involves debt collectors.
Also, 35 percent of adults have a debt in collections, a recent Urban Institute study found.
It estimates that some 77 million Americans owed an average of $5,200 in overdue debts.
That means a lot of people are dodging calls from debt collectors, some of whom use overly aggressive - and illegal - tactics.
"Most debt collectors play by the rules, but it’s those who don’t that tar the industry," said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
Credit counselors "hear horror stories of people being harassed, called names and threatened by legal action," she said.
Debt in collections refers to failing to pay a nonmortgage bill, such as a credit card balance, child support, a medical or utility bill, parking ticket or membership fee. The debt is so far past due that the account has been closed and placed in collections, often with a third-party debt-collection agency.
If you’re being hounded by a debt collector, here are some things to know.
Debt-collection rules. Get familiar with the Fair Debt Collection Practices Act. It lays down the rules for how a debt collector must treat a consumer. "It is up to consumers to become familiar with the provisions within the act so that they can know when a collector has crossed the line," Cunningham said.
For example, a collector cannot harass you by threatening you, cursing, lying or calling before 8a.m. or after 9 p.m. unless you agree to it. And collectors may not contact you at work if you tell them you’re not allowed to get calls there. They can’t say you’ll be arrested if you don’t pay. Other than to get location information about you, a debt collector generally is not allowed to discuss your debt with anyone other than you, your spouse or your attorney.
See more on the law at the Federal Trade Commission website, tinyurl.com/ftc-fdcpa.
New efforts. The problem with the Fair Debt Collection Practices Act is it’s old, dating to 1977. The protection bureau has said it is considering updating collection rules for the age of new communication technology. It is likely to address email, cellphones, social media and so-called robo-suing, where collectors can use technology to sue debtors quickly and easily, said Bill Bartmann, who operates CFS2, what he calls an ethical debt-collection agency in Tulsa, Okla., that has collected from some 4.5 million people.
Statute of limitations. This is a fancy term that means time ran out for the creditor to collect the money from you, and it probably can’t sue you in court.
Still, it’s tricky for consumers because the time varies by state and type of debt, the FTC said.
For example, the statute of limitations for credit card debt in a few states may be as long as 10 years, but most states impose a period of three to six years.
Should you pay "time-barred" debts? Though ethically you might feel you still owe an old debt, legally you do not. Even so, collectors can continue to contact you about debts after they are legally "time-barred," unless you send a letter to the collector demanding that communication stop, according to the FTC.
In some states, if you pay any amount on a time-barred debt or even promise to pay, the debt is revived, resetting the clock on a new statute of limitations period.
That means the collector can sue you to collect the full amount of the debt. See the FTC guide at tinyurl.com/olddebts.
Credit effect. The time that collections stay on your report, affecting your ability to get the best loan rates or get a loan at all, is seven years.
Before collection calls start. It’s better to contact a creditor before it contacts you, Bartmann said. That way, you might avoid being reported to the credit bureau or being turned over to a collector. You might even be able to lower the interest rate on your account. And it helps to send some money, even if it’s not the minimum amount required on your statement, he said.
"It demonstrates that you’re not running. . It causes creditors to be more sympathetic and be more willing to work with you."
When the calls start. When you get a call, tell the collector that you are recording the call, and that by staying on the line he or she agrees to the recording.
"I would tell them that, even if you weren’t recording the phone call," Bartmann said. It’s likely to put the caller on his best behavior.
For the same reason, also insist on getting the name of the agent and collection company, along with a return telephone number.
Get it in writing. Insist on written verification of the debt before you have a conversation. That not only verifies the debt, but it gives you time to figure out a strategy for dealing with the collector when he or she calls back.
During the conversation. Briefly explain the circumstances that brought about your delinquent debt - divorce, job loss, health issues. Rather than offering a payment plan, ask the collector what your options are.
Terms might be more favorable than what you might have offered, Bartmann said.
Dealing with abuse. If you get an abusive collector, tell him or her to calm down or you will hang up, Bartmann said. If they don’t remain civil, hang up and call back to get a supervisor and lodge a complaint. Then complain to your state attorney general’s office, naag.org, and the protection bureau.
If it gets so bad you need an attorney, you can contact the National Association of Consumer Advocates, naca.net, and it can connect you with a lawyer.
If you don’t owe. People who don’t owe debts are often also harassed too, a protection bureau analysis found.
The bureau offers sample letters that consumers can use to deal with debt collectors, one of which tells collectors to stop contacting you unless they can show evidence that you are responsible for the debt. Go to consumerfinance.gov/askcfpb and type "debt collector" in the search box.
"People should pay their bills," Bartmann said, "but collectors should be civil in the process."
Gregory Karp, the author of "Living Rich by Spending Smart," writes for the Chicago Tribune.