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Got debt? If collector calls, talk

By Ieva M. Augstums

DALLAS MORNING NEWS - March 07, 2005 - If you don't think you've dealt with a debt collector, you may already have. That letter in the mail saying you owe money for an overdue DVD rental -- chances are it's from a collection agency. And those dinnertime phone calls you ignore may not be telemarketers but creditors instead.

If you use credit cards, have loans or pay utility bills, you have debts. And if you fall behind even by a few days in paying those debts or if an error is made on your accounts, debt collectors can contact you by mail and phone until they hear from you.

Yes, it's annoying. And yes, it can be time-consuming. But creditors and consumer advocates agree you can't ignore it.

"The important thing is to communicate," said Harry Strausser III, president of the Association of Credit and Collection Professionals, a Minneapolis-based trade group that represents collection agencies. "Don't avoid the call. Don't avoid the letter. It's in your best interest to find out more about the obligation."

The Federal Trade Commission prohibits professional, third-party collection businesses, agents and attorneys from treating you unfairly. The Fair Debt Collection Practices Act also specifically prohibits the use of harassment and false statements by debt collectors. States have similar laws.

As a consumer, you have rights under the laws. But so do debt collectors. They know their rights, so it's good for you to know yours.

So you've been contacted by a debt collector. Now what? First, don't panic. It means someone values your business. Second, don't get angry. The Federal Trade Commission restricts the actions of anyone trying to collect money you owe.

The laws cover personal, family and household debts, including money owed for automobiles, medical expenses and credit-card charges. "No one likes to be contacted by the debt collector, but most people have," said Darren Bowie, assistant director of the FTC's division of financial practices. "It's important to know your rights." In most cases, a debt collector's first contact is made through the mail.

However, if you first receive a phone call, the debt collector must send you written notification within five working days detailing the amount of debt; the name of the creditor who referred the debt to the collector; and what action to take if you believe you do not owe the money.

Leaving a message on your answering machine doesn't count: The debt collector must speak with the debtor. In some states a debtor's spouse qualifies.

When debt collectors make the first contact, whether by phone or mail, they are obliged to identify themselves, tell you they are attempting to collect a debt, and explain that any information they obtain will be used for that purpose.

It's usually in your best interest to talk to them. However, if you feel that you have been wrongfully contacted or if your debt is more complicated than just an overdue DVD, you don't have to settle the debt in that initial phone call.

"Be careful. Don't give them all your information right away. You have some time," said Bud Hibbs, a financial counselor and consultant in Fort Worth, Texas. "The biggest mistake that customers make is giving access to their money."

If you don't agree with the collector, you have 30 days to dispute -- in writing -- all or part of the debt. The debt collector must then obtain proof of the debt and stop all collection efforts until the verification is mailed to you. "It's good to have a paper trail," Hibbs said. "That way you have proof if you need to dispute or report a violation."

You also have the option to request that the collector cease communication with you. At that time, the debt collector may then contact you only once more to advise you if further action -- including legal action -- will be taken.

Be careful. That request could be more costly than the debt itself, especially if you have to take on attorney and court fees. And also be aware that if a court enters a judgment against you, the creditor may repossess your property or garnishee your wages.

And what if you file personal bankruptcy? The debt collectors won't contact you anymore. Instead, they'll deal with your lawyer and the bankruptcy court.

Just because you've chosen to avoid the debt collector doesn't mean action isn't being taken. For starters, you are still liable for any legitimate debt you owe.

And by the time a debt collector makes contact with you, in many cases your debt has already been reported to the credit bureaus. It can remain on your credit report for seven years from the date of the delinquency on your account.

A low credit score can make it more expensive for you to get a loan or car insurance, and it can make it harder to rent an apartment or get a job. And once you pay the collector, the notation isn't removed from your credit report. Instead, it will be marked as a paid collection. "I think more people today are concerned about their credit score," Strausser said. "They may be more willing to pay that debt."

Debt collectors can call you at home between 8 a.m. and 9 p.m. They can even call you at work unless you inform them your employer prohibits it. Debt collectors say they are used to getting hung up on.

"That doesn't mean we are going to go away," said Joyce Anderton, a partner at ACH Financial Group, a Kansas-based collections agency. "Perhaps the next time I call them, they will be in a better mood."

When calling, debt collectors cannot misrepresent their identity, and they must use businesslike language. They also cannot make repetitive or excessively frequent phone calls to annoy or harass you.

The number of complaints against third-party collectors nationwide more than tripled between 1999 and 2003, and the FTC says the numbers continue to increase. "We are concerned about the high number of complaints, and we want people to be aware of their rights," said Bowie of the FTC.

If you believe a debt collector has violated the law, you can contact the state attorney general's office or the FTC. "This is one segment of the industry that is confusing to consumers," said Dwain James, executive director of the American Collectors Association of Texas. "If you don't understand something, we will do our best to help."

COLLECTOR'S RIGHTS:

A debt collector may:

• Contact you by phone only between 8 a.m. and 9 p.m., unless you give permission to call at other times.

• Insist that only payment in full will be accepted. Most collectors, however, will accept reasonable plans for payment.

• Add charges to what you owe, but only those provided for by law or by your original agreement with the creditor.

DEBTOR'S RIGHTS

A debt collector may not:

• In making contact by mail, make reference to your owing a debt on the outside of the envelope.

• Use unprofessional language.

• Make repetitive or excessive phone calls to annoy or harass you.

• Misrepresent his or her identity.

-- Source: Fair Debt Collection Practices Act Resources

FOR MORE INFORMATION:

Federal Trade Commission, www.ftc.gov, or 1-877-382-4357