Saturday, Oct 03 2009 12:00 PM

Knowing your rights -- and the debt collector's rights

BY COURTENAY EDELHART, Californian staff writer

Michael Robison is more savvy than a lot of seniors who strangers call demanding money, so when a man claiming to be from a collection agency telephoned repeatedly about an outstanding bank debt Robison supposedly owed, he pumped the caller for information.

"The man didn't want to answer my questions, at first, and he was pretty rude," said Robison, a 65-year-old retired salesman who lives in northeast Bakersfield. "I finally got him to tell me which bank he was representing, which was my bank, but when I asked him which address he had on file for me, it was an address I had never lived at. That's when I knew he was after someone else with the same name."

Related Info

Consumer help

For the full text of the federal Fair Collection Practices Act, which specifies when, where and how often a collection agency can call consumers, go to the U.S. Federal Trade Commission Web site:

There is also information available from a debt collector trade group, the California Association of Collectors, which operates a consumer hotline at (800) 316-2262 and has information online at

If you believe a creditor or its agent has violated the law, contact the California Attorney General at (800) 952-5225, or go to:

Debt resolution options:

* Pay the creditor directly, enough to diminish the principal, not just the interest.

* Pay the minimum balance, which will keep the account current but won't bring down the balance.

* Enter into a debt management program with the creditor or a mediator who lowers interest and fees but not the principal balance. These agreements may or may not affect your credit score. Policies vary. Screen mediators carefully; companies that claim they can wipe out your debt or reduce your payments for a large fee may be scams.

* Enter into a debt settlement program with the creditor or a mediator that will reduce your principal. This almost always has an adverse impact on your credit score.

* File for bankruptcy protection, which typically stays on your credit record for five to seven years.

Sources: Consumer Credit Counseling Service and U.S. Organizations for Bankruptcy Alternatives

Robison followed up immediately with his bank to make sure his account was clear, and got a shock.

"The bank said they don't use collection agencies," he said.

That was two months ago. To this day, Robison doesn't know if he was a victim of mistaken identity by a legitimate company, or if the whole thing was a scam.

But either way, he says, it's a good thing he knew his rights.

The Fair Debt Collection Practices Act was enacted in 1977 to protect consumers from abusive, unfair and deceptive practices by third-party debt collectors.

It lays out a whole host of rules on the debt collection process. Unless you agree to it, for instance, a debt collector may not contact you before 8 a.m. or after 9 p.m., and can't contact you at work if you tell them you're not allowed to get calls there.

Plus, other than to obtain a current address or phone number, a debt collector generally is not permitted to discuss your debt with friends, relatives or others, but they can talk to your spouse or your attorney.

More rules coming?

The government may be refining the rules further.

The Federal Trade Commission issued a report in February that recommends changes to improve the flow of information on both sides.

The proposal would require that collectors have more accurate information so that their efforts will target the right person for the correct amount, ultimately making their work more successful.

The report also recommends requiring collector validation notices sent to consumers to disclose the name of the original creditor; break down the debt by principal, total interest and total fees; and inform consumers of their rights under the law.

If you feel you've been harassed or abused, you can report the collection agency to the California Attorney General's Office.

Last year, there were 1,837 such complaints, according to the state. So far this year, there have been 1,505.

"Debt collection complaints are among the highest number of complaints at state attorneys general offices across the nation, but remember that what consumers might call harassing and what the law considers harassing may be two entirely different things," said Jenna Keehnen, executive director of U.S. Organizations for Bankruptcy Alternatives, a national association of debt negotiators based in Houston.

Some consumers don't want to get calls at all, Keehnen said, but that's not reasonable.

"If you owe, you owe," she said. "Even a collector caught doing something wrong isn't going to make the debt go away. If an agency breaks the law, the creditor will just hire another agency."

Trying to collect debts

Collection agencies don't like confrontation any more than consumers, said Hal Ennis, president of Bakersfield agency Commercial Trade Inc.

That's why the industry polices itself through trade organizations such as the California Association of Collectors, which encourages members to adhere to a code of ethics, Ennis said.

"Any field has bad apples who do their own thing, but the law is pretty straightforward, and we train all our staff to comply with it in addition to our industry's code of ethics," he said.

The industry doesn't condone abusive or deceptive tactics, said Jan Stieger, executive director of the California Association of Collectors, based in Sacramento.

"On the other hand, people who don't pay their debts make it more expensive for everybody, because companies have to raise prices for products and services to cover their losses," Stieger said.

"It's best not to ignore phone calls and letters. Just go ahead and talk about it, because collectors are always willing to work out payment plans or negotiate settlement offers, whatever it takes to get the issue resolved."

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