How to Protect Yourself from Overzealous Debt Collectors: Know Your Rights

Past due envelope with postage
A couple of weeks back, a debt collection agency based in Glendale, Calif., agreed to pay $1 million to settle complaints from the Federal Trade Commission over its business practices. The agency, which went by the name "National Attorney Collection Practices," had been harassing delinquent borrowers with debt collection notices bearing an illustration of Uncle Sam's fist upending some hapless soul and "shaking him down" for loose change.

The harassment didn't end there.

Targeting Spanish-speaking debtors and lower-income consumers who'd fallen behind on loans to payday lending operations, "National Attorney" inundated debtors with phone calls, postal mailings, and text messages to their cellphones that:
  • falsely represented that its notices were coming from attorneys
  • "unlawfully ... threatened legal action, arrest, imprisonment, or garnishment" if debtors didn't pay up
  • and failed to include necessary "disclosures" advising debtors of their legal rights.
In some cases, the FTC accused National Attorney of even sharing details about consumers' debts with their friends, family, and co-workers, apparently in an attempt to pressure the consumers into paying. And to top it all off, the FTC says that National Attorney "refused to provide their business address or validation letters to consumers, thereby depriving consumers of the right to send cease-and-desist letters or to dispute alleged debts."

Summing up its charges, the FTC alleged that National Attorney "engaged in deceptive and unfair practices in almost every facet of their dealings with these consumers" -- and fined the company $1 million.

Know Your Rights

Of course, the FTC can't step in to stop every debt collector from breaking the law -- at least not in real time.%VIRTUAL-article-sponsoredlinks% So what can you do to protect your rights, and prevent companies like National Attorney Collection Practices from taking advantage of you when the FTC's not looking? Well, the first step is knowing what your rights are.

Online consumer complaint service cites at least four main rights you have to protect yourself:
  • Keep work and home separate: National Attorneys crossed a big red line when it tried to collect debts from consumers at their place of work. Tell debt collectors not to contact you at work -- ever.
  • Let's keep this between you and me: Even legitimate attempts to collect a debt are matters to be discussed between the lender and the debtor. If you find out that a debt collection agency has contacted your friends or family -- or anyone else -- about your debt, tell them to stop. (And then file a complaint.)
  • You catch more flies, and fewer FTC lawsuits, with honey: What constitutes "harassment" is often going to be in the eye of the beholder, but Scambook says that once communication from a debt collector has risen to the level of harassment, it's no longer kosher. Tell them to knock it off.
  • Support your local post office: Technology is a marvelous invention. But even so, debt collectors have no right to harass consumers over the phone and by text, by day and by night. If you are the subject of such harassment, tell them you want all future communication to be conducted by mail. This is a request they must honor.
Also keep on the lookout for other instances where debt collectors are playing fast and loose with the rules. To name just a few violations, the FTC called out National Attorney for:
  • Failing to disclose in the very first text message that the company was a debt collector trying to collect a debt.
  • Failing to provide details on the supposed debt the company was attempting to collect, and failing to inform the consumer of his or her right to dispute the debt's validity.
  • Including statements on the outside of the envelopes on postal mailings, noting that the contents relate to an attempt to collect a debt. Because these envelopes could be seen by anyone, that's a violation of the rule against informing third parties about a consumer's debt situation -- and it's a no-no.
For more information on your rights under the Fair Debt Collection Practices Act, click this link right here.

Motley Fool contributor Rich Smith has no position in any companies mentioned above.
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