Have you ever wondered exactly where the line between legal and illegal is drawn in terms of debt collection? Perhaps you felt that a collector overstepped in contacting you at work. Or maybe you are attempting to collect on your own behalf and aren’t exactly sure what the rules are.
No matter what side of a collection issue you find yourself on, it always pays to have a good understanding of the rules. In order to help make some sense of some of the legal specifics, we have put together a list of some of the most frequently asked questions concerning debt collection here in the state of California. Let’s get into it!
What is the Law on Debt Collection?
The two primary laws that set the rules for debt collection are the Fair Debt Collection Practices Act and the California Fair Debt Collection Practices Act. Every consumer in the United States is protected by the FDCPA, but consumers in the state of California have some added benefits provided by the CFDCPA. So there are quite a few rules and regulations that need to be followed by anyone attempting to collect a debt from a consumer in the state of California.
The FDCPA places some general limitations on commercial debt collectors. It specifically forbids common collection tactics like making calls to consumers too frequently, calling consumers after certain hours, and attempting to threaten or harass consumers. The CFDCPA expands on the regulations specified by the FDCPA by including just about anyone attempting to collect an outstanding debt, rather than just focusing on commercial debt collection agents.
As a general rule, any collection tactic that would be considered unethical is forbidden by both the FDCPA and the CFDCPA.
What Are Statues of Limitations?
The term “Statue of Limitations” refers to the amount of time that must pass before a creditor or collection agency is no longer legally allowed to pursue a consumer over an outstanding debt. A debt that has passed the time specified by the statue of limitations is often referred to as a “time-barred” debt.
The amount of time that must pass before a debt can no longer be collected varies dramatically from state to state. For consumers in the state of California, the statute of limitations is four years for any debt involving a written contract, and only two years for debts involving verbal contracts.
When Can Debt Collectors Make Phone Calls?
According to the FDCPA, commercial debt collectors are only permitted to place phone calls to consumers between the hours of 8 am and 9 pm according to the local time of the consumer. Because the CFDCPA expands the definition of debt collector to include just about anyone attempting to collect an outstanding debt, these rules follow through to original creditors here in California.
In addition to the time constraints on phone calls, debt collectors also need to be very careful when contacting consumers while they are at work. It is against the law to discuss any details regarding the debt with anyone other than the debtor, which includes employers and coworkers. It is also illegal to attempt to contact a debtor at work when you are aware that an employer does not permit such calls.
As a final note on phone calls, collectors also must respect any type of cease and desist letter that they might receive from a creditor or a representing attorney.
What Happens If You Don’t Pay?
If the outstanding debt is a legitimate debt and the debtor refuses to make it good, the next step for many collectors is to begin the legal process. This could involve a number of different court appearances that eventually result in a judgment against the debtor. Once that judgment is obtained, the collector will have the ability to contact the debtor’s employer and set up a wage garnishment to recover what is owed.
Of course, this is assuming that the creditor has everything needed to prove that the debt is a legitimate one. That means having all of the necessary documentation from the original agreement, getting the court documents filed before the statue of limitation is up, and keeping detailed records of all correspondences with the debtor.
Can a Collection Agency Affect My Credit Score?
In addition to getting a judgment against a debtor and garnishing wages, debt collectors can also report any delinquent accounts to the credit rating agencies. This can have a lasting impact on a consumer’s credit score that can end up haunting them years down the road when they go to purchase a house or a new vehicle.
For many consumers, this is the most powerful motivator when it comes to pushing them to make good on an amount owed. Just the threat of something slowing down their next big purchase can be scary for anyone, so this often ends up being the reason that consumers finally settle those old accounts.
For that reason, many sharp collection agents will offer to either remove or amend their report to the credit rating agencies in exchange for payment in full. And if that doesn’t get the debtor motivated in the moment, they will remember it down the road when they need their credit score to improve.
Can I Pay the Original Creditor?
This question is not specifically addressed by the FDCPA or the CFDCPA, but the most common answer you will find is that it depends on the situation. Who is able to collect the payment is often something that is worked out between the original creditor and the agency attempting to collect on their behalf.
In some instances, like when the debt has actually been purchased from the original creditor by the collection agency, you are probably not going to be able to make any form of payment to the original creditor. However, if you are dealing with a situation where an agency is collecting on behalf of the original creditor, they might authorize the original creditor to take that payment.
Both the FDCPA and the CFDCPA were put in place to protect consumers from predatory debt collection tactics. Here at Direct Recovery, we don’t believe that those tactics are best for business anyway, so we always find ourselves on the right side of the regulations. By following the letter of the law and operating in an ethical manner, we are able to achieve excellent collection percentages through honesty, hard work, and dedication to our craft.
