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As numerous economic hurdles loom, millions of Americans have found themselves struggling with their debt payments. About 20% of credit card users are maxed out, meaning that they’ve used up all of their available credit, and nearly 9% of credit card debt payments are now delinquent. The problem is that these types of issues can come with big repercussions, from credit damage to late fees and penalty APRs — and if you miss too many payments, your account may be turned over to a debt collector.
Debt collectors are typically hired by lenders to recover unpaid debts after they’ve become seriously delinquent — typically after 90 days or more of nonpayment — and the tactics they use can range from polite reminders to much more aggressive collection efforts. In these situations, it can feel like the debt collector holds all the power, but the truth is that there are legal limitations on the tactics they can use.
Debt collection is governed by laws like the Fair Debt Collection Practices Act (FDCPA), which sets clear guidelines for how debt collectors can interact with consumers. So what are debt collectors legally allowed to do — and what strategies are they prohibited from using — when trying to collect on a debt? That’s what borrowers should know, especially now.
Find out how to tackle your debt problems today.
4 things debt collectors can do if you owe money
Here are a few things debt collectors are legally allowed to do if you owe them money:
Contact you about your debt
Debt collectors are allowed to contact you about the debt through various channels, including phone calls, letters, email and text messages. They’re allowed to contact you at home or work (unless you tell them in writing not to call you at work). And, they can reach out multiple times, though there are restrictions on how often and when they can call.
Speak to a debt expert about the options available to you.
Report your debt to collection agencies
If your debt remains unpaid, collectors can report it to credit reporting agencies. This is one of the most powerful tools debt collection agencies have, as a collection account on your credit report can make it harder to get approved for loans, credit cards or even housing for several years. That’s why it’s essential to address collection accounts as soon as possible.
Offer a settlement
Debt collectors can ask you to pay the entire amount owed, but they can also work with you to find a compromise, which many of them are willing to do, especially if the debt was purchased for less than what’s owed. As part of that process, they’re allowed to discuss different payment options and terms — which could open the door to settling your debt for less than what you owe.
Take legal action
If you ignore a debt long enough, a debt collector may sue you in an attempt to recover the money. Debt collectors are allowed to file a lawsuit against you as long as the statute of limitations hasn’t expired. If they win, they may be able to garnish your wages or place liens on your property, depending on state laws and the type of debt. However, they must follow due process, and you have the right to defend yourself in court.
4 things debt collectors can’t do if you owe money
If you owe money to a debt collector, they’re prohibited by law from doing the following:
Harass or threaten you
Debt collectors are prohibited by law from harassing you or abusing you through repeated calls, threats or obscene language to pressure you into paying. They can’t call repeatedly to annoy you, threaten violence or harm, use profane language or publish your name on a “bad debt” list. They also can’t call before 8 a.m. or after 9 p.m. unless you agree to it.
Lie about the debt
Debt collectors are not allowed to lie to you or use deceptive practices to collect the debt. This includes misrepresenting the amount you owe, claiming to be a government official or pretending that failing to pay will lead to criminal charges. If a debt collector lies to you, they are breaking the law.
Discuss your debt with others
Debt collectors cannot discuss your debt with anyone other than you, your spouse (in some cases) or your attorney. They cannot leave messages with co-workers, relatives or friends disclosing that you owe money. While they can contact others to find your address, home phone number or workplace, they can’t contact these third parties more than once.
Threaten arrests or jail time
Debt is a civil matter, not a criminal one, so you cannot be arrested for unpaid debt alone — but some debt collectors will use threats like these to try and scare you into paying what’s owed. If a debt collector claims that you’ll be sent to jail for not paying, it’s important to understand that they are lying and violating federal law.
The bottom line
Dealing with debt collectors can be stressful, but understanding your rights can make a significant difference. While debt collectors are allowed to contact you, report your debts and even take legal action, they are strictly prohibited from harassment, dishonesty and revealing your debt to others. By knowing what’s legally allowed and what isn’t, you can make informed decisions, negotiate more effectively and protect yourself from unfair debt collection practices.
