Who is calling
By the time a collector calls, the debt has often been sold for pennies on the dollar with thin paperwork. The federal Fair Debt Collection Practices Act governs these third-party collectors and debt buyers. It generally does not cover an original creditor collecting its own account.
Under that law a collector may not call before 8 a.m. or after 9 p.m., may not call your workplace once told your employer forbids it, may not threaten you, and may not discuss the debt with your family or your boss. Federal rules presume that more than seven calls in seven days about one debt is harassment.
The first thirty days
A collector must send a validation notice within five days of first contact, stating the amount, the creditor and your right to dispute.
- Ask on the phone only for the written notice, and do not confirm that the debt is yours.
- Send a dispute letter within 30 days by certified mail with a return receipt, and keep a copy.
- Wait, because the collector must stop collecting until it mails you verification.
You can also demand in writing that a collector stop contacting you. That ends the calls, leaves the debt in place and does not prevent a lawsuit.
Old debt and the clock
Every state sets a statute of limitations on debt lawsuits, usually three to six years. After it runs, the debt is time-barred, and a collector can ask for payment but cannot win in court if you raise the defense. In many states a small payment or a written acknowledgment restarts that clock, which is why collectors ask for a token $20. A separate clock governs your credit report, where a collection account drops off seven years after the original delinquency, and paying does not reset it.
Settling and being sued
Collectors routinely accept a lump sum of around half the balance. Get the agreement in writing before you send money, and never authorize withdrawals from your bank account. Forgiven debt of $600 or more may be reported to the IRS as income.
If you are served with a lawsuit, file a written answer by the deadline on the summons, commonly 20 to 30 days. Most collection cases are won by default because the defendant never responds, and a judgment opens the door to wage garnishment and bank levies.
Note Complaints about a collector go to the Consumer Financial Protection Bureau and your state attorney general. A collector who breaks the federal law can be sued for damages plus your legal fees.
