The first call from a collection agency can be terrifying. If you owe several collectors, you may even avoid answering your phone. Being in debt and facing collection is already stressful. However, particularly aggressive agencies may leave you worried after you hang up. You might even be asking yourself whether collection agencies charge more than you owe. If you have been contacted by a debt collector, begin by learning your rights.
Fair Debt Collection Practices Act (FDCPA)
If you feel that a debt collector is being overly aggressive or crossing legal boundaries, you need to familiarize yourself with the Fair Debt Collection Practices Act. The FDCPA passed into law in 1978 to protect consumers at the federal level. Most states have their own laws regulating debt collection practices as well.
In layman’s terms, this piece of legislation limits what actions collection agencies can take against you. First, debt collectors are only allowed to contact you once a day between the hours of 8:00 AM and 9:00 PM. Second, debt collectors must identify themselves when they try to collect what is owed. They must also let you know that any information you give them can be used to aid in collecting the debt. When asked, collection agencies must also provide their company name and contact information. This is especially useful if you are unsure about legitimacy of the company. Check with your state’s attorney general or the consumer affairs office if you have doubts.
During the call, they cannot use harassing language or threats. It is also illegal for the debt collector to contact a third party about your debt unless it is a spouse or guardian. The FDCPA also prohibits the use of social media and questions beyond where you live, work, and your phone number. Finally, if you feel there has been a mistake, you have 30 days to dispute debts once you have been formally contacted.
What are the Collection Agencies Limitations?
Despite the clearly defined terms in the FDCPA, you will still hear testimonies that collection agencies charge more. However, you should take these statements with a grain of salt. Debt collectors must adhere to the terms and conditions you agreed to in the original contract. This is particularly important when it comes to interest rates and fees.
If the contract does not specify a late fee, then you should not see any appear once the collection agency has bought your debt. The bottom line is that the collection agencies cannot charge more than you agreed to pay. The regulations are in place to prevent collectors from vindictive practices and racking up charges if you do not answer the phone.
When Can Collection Agencies Charge More?
The discrepancies in the amount of debt come from applied interest rates. Most loans clearly define interest charges, fees, and penalties in the Truth in Lending Disclosure. Unfortunately, credit cards become a gray area due to variable APR rates. If you read the fine print, there are no set interest rates in the card agreement.
Most collection agencies will not add additional interest or fees once the account is frozen. Adding more fees and interest only increases their losses. Furthermore, they must send monthly statements if they apply interest after the account has been frozen. Be sure to check your mail if you believe a collection agency is charging you more than is due. If you have not been notified, you may be able to dispute it.
Debt collection agencies are allowed to apply contract fees and interest rates within the statute of limitations, which is ten years. Although is it not usual practice, third-party collectors may charge more than you owe once they purchase your debt. But, it is problematic for collection agencies to add interest charges because it is difficult to prove in court.
After a Collection Agency Contacts You
If you see an inaccuracy or believe you have been charged too much, check your credit report. This will not only tell you the debts you owe, but how old they are. This may be to your benefit if your debt is outside the statute of limitations. Knowing your rights and owning your debt will help you deal with collection agencies. If you feel like it is beyond your control, contact a debt relief agency to see what options are available to you.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.