Fair Debt Collection Practices Act - How Collection Agencies Work And The Laws That Protect You From Third Party Debt Collectors!The Fair Debt Collection Practices Act is a law that was created in 1978 with the main purpose of eliminating abusive practices when it comes to the collection of consumer debt, and to make sure that the process is also fair and that consumers have a way of disputing and validating the debt.
It also aims to make sure that consumers have a way to make sure the information is accurate. This act also brought about the guidelines that debt collectors must follow when conducting business, it also makes sure the consumer rights are defined when dealing with debt collectors and has penalties on the books in the event that debt collectors violate the guidelines contained in the act.(continued below) The Fair Debt Collection Practices Act applies to third party debt collectors, which are companies that are in the business of “buying debt” for one price and collecting more from the debtor or consumer.
For example, Bob has a credit card with a maxed out limit of $10,000 and is unable to continue making regular payments on the card, and the account goes into default. The credit card company will try and collect on the account for a certain period of time before they “sell” the account to a third party debt collector.
This company will purchase the debt from the credit card company for a fraction of the original amount owed, usually pennies on the dollar so they may end up paying only $1500 for a $10,000 debt after the transaction is complete.
Their next step would be to try and collect as much money as possible from the consumer, “by any means necessary”, which usually tends to be verbal harassment among other methods. Most of the employees of debt collection companies work on a commission structure, the more they are able to collect the more they get paid.
This adds more pressure for deceitful tactics from third party debt collection companies.
With credit being one of the primary means of purchasing goods in the United States, there is also a good number of accounts that fall into default and are in turn sold to third party collectors. Third party debt collection is big business, accounting for billions of dollars in profit for owners of these companies.
The collection industry has grown from roughly 70,000 workers in 1990 to nearly 150,000 in 2005 according to the U.S Bureau of Labor and Statistics.
It is a good idea to be familiar with some of the Fair Debt Collection Practices Act so that you know exactly when debt collectors are breaking the law. There is also a provision in the law that says you can file suit against debt collectors if they break the law when trying to collect a debt.
Collection Agency Laws - Understanding these laws will help you deal with collection agencies
Return to Bad Credit Repair Tips from Fair Debt Collection Practices Act
|
