How Credit Card Companies Get Around the Fair Debt Collections Practices Act

Posted by Average Joe on November 29th, 2008 at 04:16pm

I’ve heard people tell stories about how many years ago you used to get bombarded by collectors via the U.S. Postal Service.

These days, thanks to the Fair Debt Collections Practices Act, they’ve found much better ways to harass you. 3rd-party collectors are required to send you a notice in the mail, but they’re highly incentivized to contact you by telephone. The reason? The FDCPA lays out significant regulations around telephone contact. If you deal with creditors by phone, you virtualy waive all your rights and give up any leverage you may have.

I’m not saying don’t ever talk to them. But, you can tell that they don’t want you to contact them by mail because they do their best to cause their dunning letters to look like junk mail. This should be a clue. If mail was something that worked to their advantage, you’d see a lot more activity there. Insteady, they want to send you the minimum notice to abide by the law, and then hound you to death on the phone.

By the way, under the law, a 3rd-party collector is required to send you the notice within 5 days of contacting you.

How To Avoid Harrassment by Phone

Here’s what you need to do right away:

1. When you are contacted by a new debt collector, immediately make note of the date and time of the first phone call.
2. As soon as you receive the written notice (it should be postmarked within 5 days of the first phone call), respond in writing. Your response should dispute the debt (even if you think you owe it, the amount may be wrong), request verification (they must stop contacting you until they mail you the verification according to the law), request that they prove that they have a legal right to collect the debt (this is actually an interesting legal question – particularly if it was a credit card debt), and document date received (send it certified mail, return receipt requested – this proves that they received your notice)
3. Make notes about everything – whether they contacted you after receiving your written communication and before they mailed you the response, for example. This may come in handy if you ever want to sue them for violating the FDCPA.
4. For your written request to protect you, it must be sent within 30 days of your receipt of their written notice.
5. Then, mail a 2nd notice announcing to them that they are not permitted to contact you by phone. Specifically state that you are not permitted to be contacted at work, that they are not permitted to contact you or anyone else by phone. They will try to locate your relatives and harass them as well, unless you specifically state what they are permitted to do and not permitted to do. Send this notice certified, return receipt requested.
6. Document everything. If they call again, it can only legally be because they are notifying you of some action they are taking (e.g. filing suit, canceling the debt, etc). If they call after they have received your written notice, and they’re only calling to ask you when you plan to pay or otherwise ask for payment, then you have an actionable violation of the FDCPA on your hands. At that point in time, it’s worth it to contact an attorney that specializes in protecting consumers.

Here’s How They Trick You

The debt collectors are highly experienced. They study what works and what doesn’t work. Harassment works. They wear you down until you do something that you would otherwise not do (borrow money from relatives, declare bankruptcy, etc). They also know how to get right up to the edge of what is legal under the FDCPA and push you. They also frequently violate the act, but because consumers are typically uninformed, they get away with it.

One stunt that they pull is that of selling the debt off. Once you have sent written notice to a 3rd-party collector (as long as you haven’t invited them to sue you by using words like “cease and desist”), they will typically sell the debt to someone else (or, if the original creditor still actually owns the debt, they will choose to reassign it to a different collection agency).

What this means to you is that the process starts all over again with a new debt collector — even though it’s for the same debt.

One nasty offender along these lines is American Express. They use a wide range of debt collectors, some of them “law offices,” which makes it sound very official when they call you. If someone contacts you from a “law office” regarding a debt to American Express, chances are extremely good that the person calling you is not an attorney. Nor do they have any intention of suing you. It’s far more profitable for them to remain in the debt collections business rather than the litigation business.

If someone from one of these bottom-feeding organizations tells you that they are an attorney, make a note of their name and ask them what state they are admitted to practice law in. They cannot tell you that they are planning to sue you (or take any other legal action) if they aren’t actually planning to do so. What’s interesting is if they aren’t licensed to practice law in your state, then they aren’t planning to sue you. Plain and simple.

If you aren’t vigilant about taking these steps with each 3rd-party debt collector that contacts you, be prepared for a barrage of calls.

One particularly nasty offender is NCO Financial Systems, Inc. They are a collector for American Express. They may collect for other companies as well, but I couldn’t tell you from any personal experience. What I can tell you is that they have contacted me hundreds of times. Frequently they hang up or leave automated messages. I’m willing to bet that someone will be initiating a class-action suit against them for violating the FDCPA. If so, you will see my name in the class (assuming that there’s decent representation in the case).

They are particularly annoying because their dialer goes nonstop.

One piece of advice: if you plan to pay the creditor(s) what you owe, then send them $10 a month or some basic amount on a consistent basis. If you do that along with taking the other steps I mentioned above, you can count on them not annoying you by phone.

Trust me, it’s worth it.

Read more about the Fair Debt Collections Practices Act.

Tags: American Express, credit card companies, creditors, debt collections, Fair Debt Collections Practices Act, FDCPA, money, NCO

Under Harassing Phone Calls