When starting a credit repair company, you will inevitably be approached by clients who have been contacted by debt collectors. There are several federal laws and regulations, primarily the Fair Debt Collection Practices Act (FDCPA), and state mirror laws that protect consumers from being harassed or abused by debt collectors. The FDCPA was created to prevent unfair, deceptive, or abusive practices by debt collectors. Many debt collectors break the law. When they do, it’s not only possible to stop the harassment, but it’s also possible to be awarded a settlement.
“Many debt collectors break the law. When they do, it’s not only possible to stop the harassment, but it’s also possible to be awarded a settlement”
In your ongoing effort to become an expert in all things credit repair, it is important to understand these regulations so you are able to advise clients on how to respond, and whether they are being treated unfairly. As your credit repair business grows, we recommend building a relationship with a local law firm that specializes in debt collection so you can work together to help your clients repair their credit.
The FDCPA includes three major debt collector restrictions that could affect your clients. These are explained below with examples of each:
- Harassment or abuse:A debt collector may not do or say anything that leads to harassment, oppression, or abuse. This includes making threats to individual safety, income, freedom, or employment.Examples: A debt collector cannot use abusive or obscene language. They cannot call before 8 a.m. or after 9 p.m. unless you agree.They cannot call you at work if you have asked them not to, and they cannot speak with anyone else (other than your attorney) about the debt. They alsomay not threaten to publish a debtor’s name publically as someone who doesn’t pay bills.
- False or misleading representations: A debt collector may not represent themselves in a deceptive or misleading way. They must be clear that they are debt collectors and are contacting the individual for the purpose of collecting debt. Especially relevant to your clients: Debt collectors must communicate that a disputed debt is being disputed.Examples: A debt collector that sends communication or makes phone calls claiming to be calling from a government agency, attorney or law enforcement or a credit bureau representative in order to get information or payment would be in violation of the FDCPA.
- Unfair practices: A debt collector cannot use any unfair or outrageous means to collect a debt. This includes adding or causing a debtor to incur fees that were not part of the original debt agreement.Example: A debt collector may not collect extra fees or interest from the debtor for any reason.
Once a client receives an initial letter of communication from a debt collector, called a “Dunning” letter, he or she has thirty days to respond to dispute the validity of the debt or request verification of the debt. Either of these actions will trigger a stop in all communications from debt collectors while the debt is being investigated. Remember that disputing the debt will not make it disappear. It is important to give your clients a clear picture of what to expect in the debt dispute process.
Now that you understand the basics of the FDCPA, it is important to know how you, as a credit repair professional, should advise your clients to proceed when treated unfairly by a debt collector.
The most important thing is to collect all communications that your client has received from debt collectors. This can be most easily done through your credit repair software. When teaching clients how to upload documents to their client portal, encourage them to upload everything they have received from debt collectors. Quick and easy access to all documents related to the debt collection, and later possible dispute or verification, is crucial to the process.
It’s also important for the client to take notes during any phone conversations with the debt collector and write down the time and date of any calls and to keep copies of any voice mails received. This type of record keeping will become critical evidence if the collection agent has broken any laws.
In addition, here are 6 ways that your client can strike back against a debt collector who is violating the law:
- Report the debt collector to a Government Agency
For example: The FTC at www.ftccomplaintassistant.govor the CFPB at www.consumerfinance.gov/complaint. - Report the violations to the State Attorney General, because the debt collector is most likely violating State laws, as well.
- Sue the debt collector in small claims court
- Sue the debt collector in state court
- Use this violation as leverage in a debt settlement negotiation. Debt collectors know how costly a FDCPA lawsuit can be for them, so they may be more likely to settle the debt.
- Consult with a law firm that specializes in debt collection.
As your credit repair business grows, we recommend cultivating a partnership with a law firm that specializes in debt collection. Skilled attorneys will comb through all communication received from debt collectors looking for violations that can be used to dispute or remove the debt. They will interview your client to understand the debt, examine the credit report for violations, and contact the debt collectors on the client’s’ behalf. In most situations, these law firms will collect their fees only if the case is won, at no cost to you or your clients.
“In most situations, these law firms will collect their fees only if the case is won, at no cost to you or your clients.”
When dealing with debt collectors, it’s important to keep in mind that FDCPA only applies to personal or household debt accumulated by individual consumers. The guidelines do not apply to any type of business debt. Secondly, “communications” from debt collectors can refer to any direct or indirect contact, including posting information to individuals’ credit reports. Finally, in the FDCPA a “debt collector” refers to any person or company who regularly collects debt. This usually does not include the original creditor.
As a credit repair professional, you are a trusted advisor to your clients on all things related to their credit and debt. Understanding and having the ability to advise on the FDCPA is a crucial part of this process. By collecting necessary information and having easy access to attorneys that will help your clients reach their goals, you will position yourself as an expert in your field.
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