Most households in the United States have consumer debt, making it hard to keep up with ongoing living expenses. Over time, the financial pressures mount, and families face increasing hardship keeping up when the debt bills are due. Consumers often don’t know how many options they have as they try to get out of debt and they might experience harassment from debt collection agencies, which is why consumer protection debt laws have been established.
Consumer rights vary based on location. Federal laws are in place to ensure fair practices for debt consolidation and debt collection. While most states follow the federal regulations for debt regulation, there are certain exceptions and unique details regarding the way debt collection is managed.
Debt Consolidation in Your State
Debt consolidation programs provide a stress-free way to negotiate the payoff amounts and help debtors achieve financial freedom as quickly as possible. It is common for many debtors to be caught in the cycle of minimum payments or missed payments that make it feel impossible to ever pay the debts in full.
Debt settlement is a form of debt consolidation that can be used to help consumers get out of debt. Our specialists work through all your accounts by reaching out to the creditors to reduce the overall amount of debt owed – giving you a clean slate so you can get back on the path to financial independence.
Our debt settlement services are offered throughout the United States but are not available in Connecticut, New Hampshire, Vermont, Oregon, Kansas, South Carolina, Maine, and West Virginia.
Debt Collection Laws
The Fair Debt Collection Practices Act (FDCPA) is designed to provide the protection consumers need. These federal regulations set strict rules for creditors and debt collection agencies to ensure that they don’t resort to harassment, deceptive, unfair, or abusive measures to collect the debts that are owed. The purpose is to give creditors the right to be treated respectfully and fairly in the debt collection process.
The FDCPA covers personal debts, including credit cards, mortgages, medical debts, and other personal loans. This law does not apply to business debt. Debt collection rules include:
- Communication Restrictions: Debt collectors are not allowed to contact debtors at an unusual place or time. Communication must occur between 8 a.m. and 9 p.m., and the collectors are not allowed to contact you at work.
- First Contact: During the initial contact, the debt collection agency should tell you who they are, the purpose of the call, the creditor represented, the full amount owed, and content information. Additionally, this information needs to be provided in writing within five days after the phone call.
- Preferred Communication: You have the right to request how the collection agency contacts you. For example, you can request that they only contact you at home and phone calls to family members are not allowed.
- Respect: All forms of contact must be fair and respectful. Debt collectors cannot harass you or anyone else. No threats, profane language, or abusive behavior is allowed.
- Representation: If you are represented by an attorney, then the debt collector must send all communication through the attorney – the collector can no longer contact you directly.
- Written Request: You have the right to ask a collection agency to stop calling you. When a person tells a debt collector in writing to stop calling them about the fee, then the debt collector is obliged to stop further contact. The only contact allowed is to send a notice of consent, as well as the action that might be taken in response (such as filing a lawsuit).
- Negotiated Terms: If the payment terms are negotiated over the phone, you can request to have the collection agency send the agreement in writing.
- Filing a Complaint: Document the details of communication so you can file a complaint to the FTC if needed. A complaint can also be filed through the Consumer Finance Protection Bureau (CFPB). Consumer support is available if the collection agency does not abide by these rules.
Specific debt collection details vary in each state. For example:
- Statute of limitations range between 2 – 15 years
- The maximum interest rate that can be charged range between 3 – 15%
- Wage protection ranges between 75 – 100% for an agreed-upon amount of time
The following states follow the FDCPA without further specifications:
- New Jersey
- New Mexico
- North Dakota
- Rhode Island
Exceptions to the General Debt Collection Laws
While most states follow the Fair Debt Collection Practices Act (FDCPA), some states have exemptions to the general laws. Here is a brief overview of some of these exceptions and additions to the federal debt collections laws.
- Arkansas, Delaware, Georgia, Idaho, Kansas, North Carolina, South Dakota: Phone calls and mail communication cannot be sent to the debtor’s work without a good-faith effort and failure to contact the debtor at home.
- California, Florida, Hawaii, Iowa, Maryland, Massachusetts, Michigan, New Hampshire, New York, Oregon, Pennsylvania, South Carolina, Texas, Vermont, Washington DC, and Wyoming: All provisions of the FDCPA must be followed by collection agencies, with the exception of provisions relating to required disclosures. For example, it is not required that the original creditor verify the validity of the debt.
- Florida and Wyoming: Communication with a debtor’s employer is prohibited before a judgment is filed unless the debtor provides consent. Violations of these debt collection rules can be punished up to $1000 and payment for the debtor’s attorney fees (up to the sum of damages sustained).
- Oklahoma, South Carolina, and Utah: The original creditor is prohibited from threatening the debtor with criminal means or violence. The use of violence or threats that cause harm could result in the loss of rights for collecting the debt through legal means.
- Alaska: The Alaska Administrative Code supplements the FDCPA, and prohibits certain activities such as misrepresentation of the collector’s identity, providing false information to the debtor, adding fees on top of the original debt, and sharing information with other people about the financial obligations.
- Arizona: Debt collectors must make a good-faith effort to contact the debtor at home before attempting communication at the person’s workplace. Collection agencies are not allowed to contact any third party about the debt. Also, the first contact must provide the debtor with information such as the creditor name, time, and place when the debt was incurred, service or product purchased, and when the account was handed over for collection.
- Colorado: The Colorado Fair Debt Collection Practices Act requires that the debt collector provides documentation about the payments made on the account. Within the first 60 seconds of a phone call, the debt collector must identify himself or herself. Also, consumers can file complaints to the Colorado Collection Agency Board or the Uniform Consumer Credit Code.
- Connecticut: Creditors are prohibited from using harassing, abusive, fraudulent, misleading, or deceptive practices for debt collection.
- Hawaii: Debt collectors are prohibited from attempting to collect a debt that is not legally owed due to bankruptcy. Additionally, collections fees cannot be added to the balance owed.
- Illinois: Debt collection agencies are only allowed to contact a debtor’s employer when the debt is more than 30 days past due. Actions that attempt physical or mental illness are banned. Information regarding the debt cannot be disseminated to third parties, other than people who have a business need for the information.
- Iowa: Collection agents must comply with the FDCPA, except for provisions for required disclosures. Information cannot be distributed to unauthorized third parties. The debt collector is prohibited from including the debtor on a “deadbeat” list, collecting debt that is not legally obligated (due to bankruptcy), or collecting fees or interest charges unless authorized by contractor or law.
- Louisiana: Debt collectors can only contact people not residing in the debtor’s home to determine the debtor’s location, seek property for seizure to satisfy the debt, or if the debtor consented to the communication. When a debtor requests a cease of communication, the collection agency can only mail one notice per month.
- Maine: The only state exempt from the FDCPA. State laws ban certain types of threats by the collection agency such as force, violence, or criminal prosecution. Collectors are also prohibited from communicating information about the debt to any third party, other than the debtor’s spouse or any other person who has a business need for the information.
- Massachusetts: Debt collection agencies can only contact a third party a limited number of times. Calls to the debtor are limited to twice a week to the home, or twice in 30 days to locations other than home. Collectors can only make one home visit in 30 days and are not allowed to visit the debtor’s office without consent, with the exception of repossessions.
- Michigan: When specifically requested to do so, debt collectors must provide the debtor with receipts for payments.
- Minnesota: Creditors and debt collectors are prohibited from using advertisements, shame cards, or shame automobiles to force payment. Automated messages cannot be used. Additionally, collectors cannot contact a third party (other than a co-inhabitant) if the debtor has a listed phone number.
- Nebraska: Third-party individuals not residing, living, or present in the household cannot be contacted regarding the debt obligation, with the exception of a spouse, attorney, a credit reporting agency, or another creditor.
- Nevada: Debt adjustments and debt counseling services may not be offered in conjunction with the debt collection efforts. Also, collection agencies cannot charge interest or collections’ fees without a mutual agreement or unless judicially determined.
- New Hampshire: A collector must attempt to contact a debtor for at least 30 days before communicating with third parties who don’t reside in the household. Communication with a third party is limited to one contact. Debtors cannot be called at work more than once a month or receive mailings at work more than once a month unless written permission is provided.
- South Carolina: Debt collectors cannot call the debtor or family members using repeated intervals during a 24-hour period. Other intentions of harassing the debtor are also banned.
- Texas: Any attempt to collect a fee for the collection agency is prohibited unless the fee was authorized in the original agreement. Violations of the collection laws can be classified as a misdemeanor with a fine between $100 – $500 for each violation.
- Vermont: Collections agencies cannot claim to have something of value (including important information) to attempt to lure the debtor. Also, if a debt is uncollectible due to expired statute of limitations or bankruptcy, collectors are prohibited from seeking payment without a clear disclosure that the debtor is not legally obligated to pay.
- Washington: All communications must include the name of the creditor and the name and address of the collection agency. The initial written communication must include an itemization showing the amount owed with a breakdown of fees and interest charges. Debt collectors are not allowed to threaten harm to a debtor’s credit rating or make more than one contact if a debt is due to fraudulent activity (such as identity theft). Communication is limited to 3 times per week or one time per week at the person’s place of employment.
- West Virginia: The collector or original creditor must not misrepresent themselves or the debt amount. Threats or actions to force the debtor to pay are not allowed. Debtors cannot be accused of a crime. Collectors cannot use profane language or resort to any other abusive behavior. No third parties can be contacted about the debt, with the exception of the debtor’s attorney. The state has fines up to $1,000 for violations, on top of the violations filed with the FDCPA.
- Wisconsin: Third parties residing outside of the debtor’s home can only be contacted to determine the debtor’s location (if the person has moved or changed jobs), seek property to satisfy the debt, or with consent from the debtor. The exception is that collectors can communicate with other creditors and credit bureaus. After a debtor has requested a cease of communication, the original creditor can only mail notices once a month and these notices cannot threaten action.
The Fair Debt Collection Practices Act (FDCPA) and other state-level rules and regulations are designed to provide the protections that debtors need when balances are handled by collections agencies. Not only is it important to know your rights, but you have access to services to manage the debt so these collections calls will stop.