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Got debt? Collector may call
Don't ignore the problem, experts say

09:21 PM CST on Sunday, January 16, 2005

By IEVA M. AUGSTUMS / The Dallas Morning News

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 just 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, a debt collector has the right to 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," says Harry Strausser III, president of ACA International – 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. Texas and other 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. If you believe a debt collector has violated the law, you can contact the state Attorney General's Office or the FTC. But remember, complaining does not erase any legitimate debt you owe.

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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 and the state of Texas restrict 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," says Darren Bowie, assistant director of the FTC's division of financial practices. "It's important to know your rights."

Notification

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 actually has to speak with the debtor. In some states, such as Texas, 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," says Bud Hibbs, a financial counselor and consultant in Fort Worth. "The biggest mistake that customers make is giving access to their money."

Consumers' rights

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," Mr. Hibbs says. "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.

In Texas, a homestead cannot be taken to pay a debt except for debts incurred for the purchase of the home, for home improvements, for home equity loans or for payment of certain taxes. And wages may only be garnisheed to pay court-ordered child support, back taxes and defaulted student loans.

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," says Harry Strausser III, president of ACA International – the Association of Credit and Collection Professionals, a Minneapolis-based trade group that represents collection agencies. "They may be more willing to pay that debt."

Debt collectors can call you at home between the hours of 8 a.m. and 9 p.m. They can even call you at work, unless you inform them that 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," says 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.

What they can do is contact people who aren't directly involved in your debt to get information on where you live and work – as long as they don't talk about the debt. But they can only contact each person once, unless they believe the person gave incomplete information.

The only person they are supposed to talk to about the debt is the debtor. In Texas, it is also legal to talk to the debtor's spouse.

More often than not, consumers think debt collectors are out to get them, Ms. Anderton says.

"I think they think we are going to say 'pay it,' no matter what," she says. "We just want to talk to you, find out why you have the debt, and help you figure out how to pay it back."

Playing fair

When you bargain with a debt collector, you're going head-to-head with a tough, professional negotiator. Don't be duped by foolery tactics. The laws say a debt collector must play fair, but that doesn't always happen.

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," says Mr. 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," says Dwain James, executive director of the American Collectors Association of Texas. "If you don't understand something, we will do our best to help."

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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.

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

E-mail iaugstums@dallasnews.com

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