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Debt Collection — Fair and Ethical Practices

The Law

In 1978, Congress passed the Fair Debt Collection Practices Act in response to reported abuse by debt collectors. In general the law regulates the activities of third party debt collectors including lawyers performing debt collection duties and persons who are in the business of debt collection. For the most part, in-house debt collectors like those for department store credit cards are not covered by the act. Most states, however, extend these protections against private persons attempting to collect debts owed to them; and may even protect debtors from those in-house collectors.

What a Debt Collector Cannot Do

At this time, 42 states have their own laws protecting debtors from unethical and unfair debt collectors including private persons collecting their own debts. Therefore, we will assume here that your attempts to collect your judgment are regulated by statutes requiring fair and ethical practices. The following is a list of practices that are generally unacceptable under these laws:

  • Third parties who do not owe the debt cannot be contacted, except for co-signers;
  • Threatening to refer the account to an attorney, harm the debtor’s credit, repossess property, or garnish wages unless there is an impending action to do so;
  • Calling at times considered unreasonable in the law such as before 8:00 AM or after 9:00 PM;
  • Calling or contacting the debtor at work, or telling the employer the purpose of the phone call unless authorized to do so;
  • Using obscenities, yelling, threatening the debtor, or using racial slurs or insults;
  • Sending letters on a letterhead appearing to be from a court or attorney;
  • Trying to collect money in excess of the debt or not allowed by law;
  • Requesting post dated checks with the intention of prosecution if they do not clear;
  • Representing yourself as an attorney who has begun a lawsuit for the client; and,
  • Threatening to arrest if the person does not pay the debt.

Ethical Debt Collection Practices

Whether you are collecting a debt yourself or decide to pay a collection agency to collect the debt, you are expected to follow certain procedures that state and federal rules deem ethical. Furthermore, whether you are collecting money from a friend, a business associate, or a person with whom you have no other relationship; you are expected to follow a certain set of ethical methods.

  • Treat all debtors with consideration and respect;
  • Be honest;
  • Offer a verification of the debt and stop all contact until they have received the verification;
  • Always be honest and refrain from fraudulent or deceitful conduct; and,
  • Refrain from harassing or threatening the debtor.

Remember, that this is the best practice anyway because maintaining a friendly relationship is the better road to collecting your debt.

Recourse for Unethical Collection Practices

If you have been a victim of an unethical creditor or collection agency, you do have some options open to you, and you should take advantage of them. First of all, contact the attorney general in your state, as he/she will be able to advise you as to what steps you should take under state law. Secondly, contact the Federal Trade Commission (FTC) and file a complaint. You can either call them at 1-877-FTC-HELP or file the complaint online at www.ftc.gov and you will receive an email copy of your complaint for your records. Thirdly, you can file a suit against the creditor or collection agency if you can prove they utilized illegal methods. In a lawsuit you can collect damages, attorney fees and court costs.

Summary

If you have won a judgment and are attempting to collect the debt yourself, you will want to be sure to use only ethical practices. Furthermore if you use a third party collector, be sure they are reputable and don’t end up causing you to lose money or reputation; or prevent you from ever collecting your debt.

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If you have been awarded a judgment, waited the 30 days required, sent a demand letter giving the debtor a time limit for paying his/her debt; what should you do if you still have no money? You know that the court can do little, but before you take steps to garnish wages or bank accounts, consider suggesting negotiation or mediation if the debtor gives any impression that they want to settle the matter.

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