Know your rights when dealing with debt collectors

Nearly 30% of consumers with a credit report had some type of debt in collections last October, according to the Urban Institute.

Credit and debt issues are among the top complaints that consumers file with state and local consumer agencies. And thanks to a new debt-collection rule issued last year by the government’s Consumer Financial Protection Bureau, complaints aren’t likely to decline anytime soon.

The CFPB’s two-part rule, set to take effect in November, will allow debt collectors to contact consumers via email, text and direct messages on Facebook and other social media sites — and there’s no limit on how many times the collectors can reach out to you using these methods. On the plus side, you may not receive as many phone calls during dinner because collectors will be limited to seven calls a week for each debt. If you pick up the phone during one of these attempts, the collector can’t call you again that week to discuss that particular debt.

That’s still a lot of calls, and consumer advocates are concerned about the lack of a cap on electronic communications, said Linda Sherry with Consumer Action, an advocacy group. If you have, say, three debts in collections, you could receive up to 21 calls a week and mountains of social media messages.

Under the federal Fair Debt Collection Practices Act, it’s illegal for debt collectors to use abusive, unfair or deceptive tactics when trying to collect a debt. And debt collectors usually can’t call you before 8 a.m. or after 9 p.m.

You also have the right to write to the debt collector and instruct it to stop contacting you. After that, a debt collector may not contact you again unless it’s to verify that it has received your request or to tell you that it plans to take some form of legal action.

The statute of limitations on debts in collection varies by state and the type of debt. But typically, debt collectors have three to six years from when the debt goes into collection to file a lawsuit against you to collect payment. After that, the debt collector can’t sue you.

But that doesn’t mean collection calls will stop, Sherry said. What’s more, making a payment on an old debt may reset the clock on the statute of limitations, and the collector could sue you for the full amount.

The new CFPB rule requires that consumers receive more information about debts in collection. Debt collectors must provide you with a written “validation notice,” either before contacting you for the first time or within five days of contacting you. It must include details on the amount you owe and advise you that you have the right to dispute the debt within 30 days.

Debt collectors must also wait 14 days after sending some type of notification before alerting the major credit reporting companies (Equifax, Experian and TransUnion) that a debt has gone into collection.