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You have debts, but that doesn't mean you don't have rights

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You have debts, but that doesn't mean you don't have rights
Just because you owe money doesn't mean anyone looking to collect it can do whatever they want to get it. Debt collectors have some very specific rules to follow, and when they get too aggressive you should know how to defend yourself.

The Fair Debt Collection Practices Act (FDCPA) sets limits intended to protect consumers from being abused or deceived into paying debts. This federal law covers just about every kind of debt, except for those incurred by a business, according to the Federal Trade Commission, which enforces the law.

If the phone starts ringing with calls to pay up, take a deep breath and deal with the situation on your terms, suggested Gerri Detweiler, director of consumer education for Credit.com.

"Don't get caught off guard," she said. "If the first time you hear from a debt collector it's a phone call, ask the debt collector to put it in writing. This is a perfectly legitimate request."

In fact, Detweiler said, they usually have to send such a letter within five days of that first call.

The most important thing from the outset, Detweiler and other experts said, is to be sure the debt that's being collected is actually yours.

"Maybe you're not sure you owe it -- definitely a possibility with a medical bill you thought insurance covered, or a last cell phone bill you thought you paid -- or maybe you think the amount looks wrong, for whatever reason, you can dispute the debt and ask the debt collector to verify it," Detweiler said. "You have 30 days to do this, and it's a good idea to put your request in writing via certified mail."

Consumers across the country are dogged by debt collectors going after either the wrong person or trying to get consumers to pay a debt that legally they no longer are responsible for.

"The No. 1 complaint category to the CFPB (Consumer Financial Protection Bureau) is debt collection and the No. 1 debt collection complaint is, 'It's not my debt,'" said Ed Mierzwinski, consumer program director for the public interest group U.S. PIRG. "Sloppy debt collectors, especially debt buyers who've bought older debt, often try to collect debt from the wrong consumer due to inaccurate records."

If that happens, Mierzwinski said, complain to the CFPB. Before you start haggling with a debt collector over a debt that you might have run up years ago, be clear about when you no longer legally owe that debt, he said.

"Even if it was once your debt, many state laws time-bar old debt, after which the debt expires," he said. "Debt collectors may try to collect it anyway but generally cannot take you to court. They'll often try to get you make a partial payment anyway, hoping to restart the clock on that debt."

Consumers should familiarize themselves with the rules about old debt from information put out by the Federal Trade Commission, he said.

Debt collectors, even when they have the right person and the right debt, still have limits as to what they can do and when.

"Debt collectors are legally forbidden from harassment," said consumer advocate Bob Sullivan. "They may not call before 8 a.m. or after 9 p.m., by law. They may not call neighbors. They may not lie, intimidate, or threaten jail time."

And, as soon as you tell them that you can't get such calls at work, they can't call you there either, according to the FTC.

Here are some other things that are forbidden:

  • Harassing or threatening you
  • Using lies to dupe you or scare you into paying, such as claiming to be from the government or saying that you will be arrested if you don't pay
  • Misrepresenting the amount that you owe or give out untrue credit information
  • Contacting you directly if you have an attorney representing you
  • Talking to others about your debt

Not only are those tactics off-limits, but if you encounter some of them it could also be an indication that the "collector" is not really a collector at all, but rather a crook.

"If you are being threatened with jail, arrest, prosecution for fraud or any extreme consequences if you don't pay immediately -- or if you are being contacted about a payday loan -- you may be dealing with a debt-collection scammer," Detweiler warned. "Proceed with extreme caution and do not pay a penny until you have verified you are dealing with a legitimate collection agency and that you actually owe the debt. Insisting they send you something in writing as required by law will usually help you figure that out. Scammers will say they can email you something or refuse because they're based overseas and can't send the required notices by snail mail."

If an actual debt collector crosses the lines, you can pursue legal action afforded to consumers under federal law, and sue them. If a judge agrees the collector violated the law, you can be awarded any money you actually lost due to the collector's actions, or up to $1,000 per violation if you didn't suffer an actual loss.

"That can add up fast," Sullivan said. "Often, simply announcing to a harassing caller that you are aware of this right -- 'Remember, continue to call after I've demanded that you stop and I can sue you for $1,000 in damages for each call' -- is enough to get harassment to stop."
You can also compel a debt collector to stop contacting you altogether, but the FTC advises that it is worthwhile to have at least one conversation to determine whether any resolution is possible. To halt contact from the collector, send a letter by certified mail with return receipt telling them that they may not contact you again. The only two permitted contacts they may have after that are acknowledging your request or letting you that they are taking a particular action, such as filing a lawsuit against you.

"Of course, simply telling a debt collector to stop calling doesn't make the debt go away -- if you owe money, you should pay it or declare bankruptcy -- but it does end what can feel like harassment," Sullivan said.

Detweiler noted that even if you pay the debt collector, it will not affect your credit score, which is the key to getting the best credit cards and mortgage rates. A debt collection notice on your credit report with any of the three credit bureaus will appear there even if the debt is satisfied, she said. It's worthwhile to get your free credit score just to see where everything stands.