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B.  Collection Agency Harassment

Retail establishments employ various tactics to collect delinquent payments. The methods used depend on the store's size and business policy. Most stores attempt to collect the debt either directly or through an attorney. Many, however, utilize the services of collection agencies.

Although the majority of collection agencies follow acceptable collection practices, the debt collection area continues to be a principal source of consumer complaints.

The most common abuses are persistent telephone calls at inconvenient hours and threatening letters and telegrams, including phony legal subpoenas. Collectors frequently pretend they are collection-reporting services as well as collection agencies and claim they can list unpaid accounts with various merchant credit retail associations. Thus, people are incorrectly led to believe that their credit rating will be seriously affected unless the bill is promptly paid. Also, some agencies illegally tack collection charges onto the debt.

Congress expanded the rights of consumers by enacting the Fair Debt Collection Practices Act more than a decade ago. Collection agencies are forbidden from repeatedly calling you at home or sending you threatening letters. Nor are they allowed to continuously contact your neighbors, relatives, and employers. The law enables you to sue debt collectors who employ false representations, unfair practices, and abuse while trying to enforce a debt. Any collection agency that fails to comply with the act's provisions is liable for actual damages, statutory damages up to $1,000, and attorney's costs.

The mother of a debtor received a telephone call at her home from a collector who identified herself as a hospital employee. The woman was told that her grandchildren had been involved in an automobile accident. This was done merely to obtain her son's home address and telephone number.

The law protects you against abusive practices of private collection agencies, professional collectors in the business of collecting debts for banks, and companies that service mortgage loans. It does not apply to attorneys, federal employees, and in-house collectors.

There are several exceptions. For example, if you buy a television set from Bad Bernie's (BB) Appliance Store on credit, and BB has its own credit department to collect payments, that department is an in-house collector and cannot be sued under the Fair Debt Collection Practices Act. However, BB can be sued if. BB's credit department collects money for BB under a different name, BB employees mail collection letters on the personal stationery of an attorney who plays only a small role in the collection process, or BB sends out collection letters on the agency's letterhead, even though the letter states that all payments are to be sent directly to BB.

Debt collectors cannot use obscene language or publish "shame" lists of people who allegedly refuse to pay their debts. Collectors cannot misrepresent themselves as attorneys or as associated with a government or law enforcement agency They cannot threaten you, your property, or your reputation. For example, letters stating "It may be necessary for our agent to call on you personally" or "A copy of this letter is being sent to an attorney, instructing him to bring you in for an oral examination and attach your personal property" are forbidden. In addition, threats of arrest or wage garnishment for nonpayment (when not allowed by local law), or threats to take legal action that collectors never intend to pursue, give you a legal basis to sue.

A favorite collection tactic is to send ornamented collection letters with official-looking seals. These convey the impression that they are legal documents issued by a court. A popular version states "The Within-named Creditor under State Statutes and Provisions hereby makes final demand for nonpayment of indebtedness." Letters of this sort and those that pretend to offer legal advice--for example, stating "In our judgment"--are not allowed, nor are notices demanding that the debtor appear at collection agency offices.

Collectors sometimes charge telegram fees and reverse telephone charges before revealing the purpose of the communication. The law protects you from these practices. In addition, late charges, interest, collection fees, and expenses cannot be added to the amount of money owed unless this is permitted under state law and you originally agreed in writing to such an arrangement before a purchase was made.

The law restricts the frequency and time of day when you can be contacted. No communication to you or your family is allowed before 8:00 A.M. or after 9:00 P.M. You cannot be called at work if the collector is told that the employer forbids personal phone calls. Letters can no longer be sent to an employer, asking him or her to discuss the debt with you. In addition, once you hire a lawyer, contact can only be made through your lawyer, unless he or she allows the collection agency to communicate with you.

Collection agencies may try to locate you through a third person, provided the information sought includes only a home address, telephone number, or business address. Relatives and neighbors have been the target of ploys to obtain this information. Prizes, gifts, and rewards have been offered but never given. These practices are now illegal. Although communications can be made by mail, telephone, or personal visits, debt collectors must:

• identify themselves-giving the true name of their collection agency upon request-and say that they are seeking to acquire or confirm location information

• contact the third party only once unless the information received is incorrect or they are given permission by that person to call back for more information

• never voluntarily state that they work for a collection agency or that they are making this communication because a debt is owed

In addition, the FTC, which enforces the Fair Debt Collection Practices Act, forbids the suggestion of collection conveyed through the mail. The mere use of language on a postcard or letter indicating debt collection, such as the name General Credit Control, Inc., in the return address or on the back of an envelope, violates the law. This ensures that the debtor's relatives and neighbors do not learn of his or her financial condition.

Many people are willing to pay their debts but need additional time to do so. The law addresses this problem. Once you are contacted by a collection agency, request verification of the debt. The agency is required to tell you the amount of the debt and the name and address of the original creditor. Then you have the right to dispute the debt. During a dispute, all collection agency activity must stop until:

• the agency contacts the creditor to determine if the debt is

  correct, or the agency sends you written notification about the debt

Therefore, if you need more time to ready your finances, and the collection agency threatens to sue unless payment is made immediately, send a letter to the agency, requesting written verification of the debt (see Figure 3.4). This will effectively stall agency action for some time.

One of the most important features of the Fair Debt Collection Practices Act is that it protects your right to be left alone. Even if you legitimately owe a debt, you can notify the agency in writing to stop all further contact and this request must be honored. You can exercise this right before or after you request written verification of the debt.

The agency cannot contact you, except by letter, stating that all collection efforts are being stopped or that specific legal action to recover the debt has been started. It is that simple.

The agency's only alternative may be litigation. However, persons with small debts, who forbid collection agencies to contact them, often have their debts "wiped out" since the amount of money owed doesn't justify the time and expense of a lawsuit. Keep in mind that your credit rating may be impaired by the failure to pay a legitimate debt.

Save all letters, telegrams, and other written documents. Collect sworn affidavits from friends, neighbors, and employers who have been contacted by the collection agency. If you are unable to sleep, or suffer a physical ailment such as nausea or weight loss as a result of harassment, document all doctor visits, medical reports, bills, and prescription purchases. Some people even tape record phone conversations in order to obtain documented proof of wrongful acts (if you wish to do this, consult a lawyer because in some states taping a conversation without the other person's permission is illegal).

Speak to a lawyer after collecting your information. He or she will decide whether to sue the collection agency under state law, the Fair Debt Collection Practices Act, or contact the FTC. If suit is brought under the Fair Debt Collection Act, it must be filed within one year.

If you prove your case, the court will order the collection agency to reimburse you for legal fees and court costs. The court can also award money for mental anguish caused by repetitious phone calls at all hours. You can even recover money spent for medical treatment, as well as lost wages, provided the collector's calls caused this condition. Punitive damages for vindictive behavior may also be awarded.

Consult the law in your state to determine whether the state imposes stronger penalties than federal law. If so, file your lawsuit in state court.

There is one final alternative. A violation of the Fair Debt Collection Practices Act is considered an unfair and deceptive practice. Thus, contact the FTC if you believe you are the victim of harassment (see Figure 3.5). The FTC can impose a variety of sanctions on a collection agency, including the return of money or property, fines, and a public announcement of wrongdoing.

Recently, the FTC entered into a consent judgment with a large collection agency accused of telephone harassment, illegal third-party contacts, and false threats of civil and criminal process. The agency agreed to pay $90,000 in civil penalties and other relief. Another $65,000 penalty was obtained from a firm that overcharged debtors. The money was used to refund the overcharges.

Never:

• disclose an unlisted telephone number on a credit application

• sign retail establishment contracts that authorize additional charges and permit collectors to contact whomever they wish about the debt

• accept collect calls from collection agencies

• volunteer information about your finances

• sign postdated checks to demonstrate good faith

• be intimidated by collectors

• assert your rights

• send correspondence by certified mail, return receipt requested

• inquire whether interest and collection charges have illegally been added to the principal debt

• instruct collectors not to call you at work because your employer forbids personal phone calls

• instruct the collector to apply payment to a specific debt if 1 more than one debt is owed

• attempt to resolve debts

• contact the Federal Trade Commission, your state attorney general's office, or a local consumer protection agency if you are harassed