A Reddit post that went viral last week provided a good reminder that borrowers unfamiliar with debt collection practices are particularly vulnerable when confronted with an aggressive collector.
When the anonymous Redditor moved out of her (or his) rented house, she did what you’re supposed to do: Cancel the cable, electricity, gas, and all the services. Unfortunately, she forgot to cancel the garbage collection at $25 per month, and after three months the $75 bill was sold off to a collections agency. Typically, if a company gives up on a consumer’s unpaid bills—medical, cellphone, student loan, credit card—the company will sell them to a collection agency at a big discount, which allows them to at least recoup part of the cost. Then, since the debt collector owns the debt, they get to keep the money they squeeze.
“Fast forward to 3 weeks ago and I get a call from this collection agency saying I owed $275 for trash pickup,” wrote the Redditor, who did not immediately respond for comment. This number, $200 more than it should have been, didn’t make any sense, so she balked. The number fell to $140, but she stood her ground, not wanting to pay more than she had to.
At this point, the Redditor knew enough to ask for the debt collector’s address and company name. According to the FDCPA (Statute 809), a debt collector must provide the consumer the amount of the debt, the company that owns the debt, and a statement that says the consumer has 30 days to ask for the debt to be verified or validated. Often, the owners of the debt know very little about what’s owed, so they are known to get things wrong on the first try.
The Redditor wrote that she sent a letter with a proof of delivery the following day asking for validation. Only the post office return receipt came back, six days later. Eventually, another person from the collections agency called back. Dismissing queries about validation of the debt, the Redditor said the collector threatened: “Look, either you pay today or we’re going to f— up your credit.”
Collection protocols
Debt collectors have the power to sue borrowers and damage their credit, and have been known to use egregious and abusive tactics in conducting their business. Since 2010, the Federal Trade Commission has banned more than 60 companies that broke the law. The Fair Debt Collections Practices Act is meant to protect consumers from using abusive or unfair methods to collect from borrowers. (In the Redditor’s case, the collector’s profane language, at the very least, would constitute harassment, according to the Consumer Financial Protection Bureau.)
For a consumer who made a small mistake—not chronically negligent by any means—this can be terrifying and expensive. According to Credit.com, a debt collector can make your credit worse, because they could sell your debt to another collection agency, which would be another “sent to collection” note reflected on your credit report.
Credit dented by collections can potentially cost you thousands in interest if, say, you’re trying to get a big loan like a mortgage. Or it can derail a deal entirely. This means it’s imperative to know your rights as a consumer, specifically what’s legally acceptable behavior for a debt collector.
Not only can this knowledge get you off the hook, you might finish an interaction with a debt collector richer.
If a collection agent runs afoul of the FDCPA and the Fair Credit Reporting Act (FCRA), the agency may be obligated to pay you. For the FDCPA, the statutory fine is $1,000 per case, and for the FCRA, it’s $1,000 per violation.
And while the Redditor’s case is nowhere near resolved—the legal process isn’t swift, though settlements can be—there’s a lot to work with here.
The onus isn’t necessarily on a consumer to hire a lawyer to fight these harmful practices. Debt collection is chiefly regulated by the Consumer Financial Protection Bureau, which became the first agency to do so in 2013, adopting much of the responsibility from the FTC, giving consumers the means to fight back against unlawful practices (without having to hire a lawyer).
Since then it has fielded over 219,200 debt collection complaints—the most common complaint issue it received in 2015, with 85,200—and has been able to collect through data on the industry’s practices and malpractices. In 38% of these complaints, the bureau says collection agencies attempted to squeeze out debts that were not actually owed. Working on behalf of wronged consumers, the CFPB secured $360 million in relief in 2015 alone—and another $79 million into the civil penalty fund.
While much of the rest of the industry involves smaller numbers and companies, the CFPB’s 2016 annual report described how the increased scrutiny by the bureau as well as the FTC has led to improvements in employee training and FDCPA compliance among debt collection agencies. After all, debt collection isn’t illegal, it just has rules.
Unfortunately, the future may be bleak for the CFPB, which will likely be under fire from the Trump administration. If the bureau is weakened — or at worse, gutted — just make sure you know your rights as a consumer if a collector comes calling. You may be on your own.
Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumerism, tech, and personal finance. Follow him on Twitter @ewolffmann.
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