Sunday, December 16, 2007

Debt Collectors Revealed: 5 Lies We Tell Consumers (And How to Stop Them)

Here is my list of the top five lies debt collectors use to get people to pay:

  1. If You Don’t Pay We Will Garnish Your Account.

Only the IRS, State Taxing Authorities, and Child Support Enforcement have the power to garnish your account without first suing you, winning, having the court issue a writ of garnishment and then garnish your account. Unless you have been sued and had a judgment taken against you, they can’t garnish your account.

Do you really think that they will garnish your wages because of a 5 year old unpaid library fine? How about an old bill from Time Life Books? Of course not, here is why:

First, the debt collection company has probably bought this debt for pennies on the dollar, or even pennies per hundred dollars. Anything they get will be profit. Second, the debt collector is probably a minimum wage employee at a call center located out of state, or even outside the United States. They make many calls per hour and are after the easy payments. Lawsuits cost money. Even if they win, they won’t normally get their attorney fees as part of the judgment.

  1. If You Don’t Pay We Will Have to Inform The Credit Bureaus.

Guess what. If the bill collector is calling, the credit bureaus have already been notified. Bad accounts hurt your credit score for approximately two years from the time that they are first reported. In other words, if the debt was reported more than two years ago, it doesn’t hurt your score anyway. In fact, by paying it, you may do more harm to your score than by ignoring it. Also if the collector makes this threat and doesn’t follow through they have violated federal and state law by threatening action that they do not intend to take.

  1. We’re Going to Take Your House Unless You Pay Immediately.

Again, it is illegal for a collector to threaten action which they do not intend to take. Unless the creditor has already obtained a judgment, or is your mortgage company, your house is safe.

  1. If You Don’t Pay Today, A Warrant Will Be Issued For Your Arrest.

In the United States, being in debt is not a crime. You cannot be arrested or imprisoned merely because of debt.

  1. Pay Up Or We’ll Hurt You.

This is the old gangster, loan shark, or Tony Soprano trick – threaten violence in order to get paid. It is also known as robbery, attempted robbery, menacing and/or extortion – all of which are serious felonies. The Fair Debt Collection Practices Act specifically prohibits threatening violence against any person or their property in order to collect a debt.

If a debt collector tries this or any of the other lies above, here is how to handle the situation. Get the collector’s name, company name and telephone number. Write down the date and time of the call, as well as any threats made by the collector. Even better, get a tape recording of the threats being made. File a report with your state’s collection bureau licensing board, state attorney general, or local police department. Under federal law, the collector may be liable for damages of up to $1000 plus court costs and attorney fees. You may be able to have the entire debt cancelled under your state law.


CatherineL said...

Interesting stuff. It seems that your country does far more to protect the consumer than they do here in the UK. Personal Finance News