Today is Senior Citizens Day! We know that many seniors find themselves in deep financial binds, leaving them feeling lost and helpless. TLC is here to help with everything you should know about debt and the law. Because when you’re well aware of regulations and your rights, it will help you to feel confident enough to start standing up for yourself, communicating with creditors, and negotiating effectively.
Original Creditors vs Collection Agencies
The first thing you should be aware of is whether the business you’re dealing with is an original creditor or collection agency. It’s important to be aware of the different laws and regulations each has, as well as the correct agencies to contact if you run into issues with their collection methods.
An original creditor is the person/business that initially gave you the credit or loan. Anything from a department store, to a doctor, to a credit card company or financial institution. If your debt has not yet been passed on, you’re still working with this business. Original creditors must follow state laws when collecting debt. Most state laws are closely in line with federal law, but some may differ slightly. It’s never a bad idea to contact your Attorney General’s office to learn your specific laws.
The collection methods of original creditors is generally less aggressive than collection agencies. They’re likely to be more concerned about keeping a good relationship with their customers. Meaning if you had a bad experience or believe they overstepped their legal boundaries, contact them. Explain your situation, why you’re unhappy, and that you want things to change. If the illegal behavior continues you should report them to the Better Business Bureau or your state’s Attorney General, so they can further investigate the company.
Collection agencies are used by creditors and lenders to recover past due funds or from accounts that are in default. They are often hired after a creditor has had multiple failed attempts to make their debt collection. The company may outsource a third-party agency, or they may have an internal department or a debt-collection subsidiary to handle the job. If it’s an internal department, they still abide under state law. Collection agencies abide under federal law, called The Fair Debt Collection Practices Act (FDCPA). The law is regulated by the Federal Trade Commission, limiting the way third-party collectors do business.
Unlike original creditors, collection agencies do not care about their relationships with customers. They are only concerned with getting back the debt that is owed. They deploy many strategies to retrieve funds, such as:
- Calling the debtor’s personal and office telephones
- Mailing numerous late-payment notices to the debtor
- Contacting a debtor’s family, friends, and neighbors to confirm the debtor’s contact information
- Appearing at the individual’s front door
Many are intimidated by debt collectors, but they are actually strictly regulated under many laws. Among many other things, they are not allowed to:
- Call you repeatedly
- Call you before 8am or after 9pm, or at any inconvenient time
- Call you at work if you tell them it jeopardizes your job
- Discuss your debt with anyone other than your spouse without your permission
- Use profanity
- Misrepresent themselves
- Make false threats
Know Your Rights
There are no laws that obligate you to talk to the debt collector, especially if you feel threatened. You can always excuse yourself and hang up the phone. Disreputable companies may make false threats to scare you into sending the money. No matter what they say, you can never be sent to jail for unsecured debts, money cannot be taken out of your account, and your property cannot be sold. Making threats such as these are illegal and should be reported to the Federal Trade Commission.
If you feel that the calls and letters should stop, you have the right under the FDCPA to send a “cease and desist” letter. This is sent to the collection agency stating you want all communication to end. This should only be used if you know you cannot be sued, or you would like to go to court. Because when the agency receives this letter they can either end all communication permanently, or begin legal action.
If Legal Action Is Taken
Being sued is a very real possibility for failing to pay unsecured debt. If the case goes to court and the creditor wins you could be held liable for more than just the original debt. To collect, the creditor may use:
- Wage Garnishment: taking a percentage of your wages until the debt is paid off
- A Levy: forcing the sale of valuable assets
- A Lien: placing a claim against property so when it’s sold a portion goes to the creditor
If you’re worried about getting sued, it’s important to know that a portion of your wages, Social Security, and most retirement plan distributions are protected from garnishment. Additionally, if you don’t own any expensive assets or property, levies and liens are irrelevant. Many seniors in financial binds are considered “judgemental proof.” Meaning if you have no income or assets to take, a lawsuit isn’t going to help them recover what is owed. If that’s the case, you should make that clear to the creditor immediately. They may decide against legal action, consider the debt uncollectible, and drop the matter for good.
While there are many routes to go when you get into a financial bind, it’s best to try to avoid one all-together. Monitor your account and manage your finances as closely as possible. Contact your creditor at the first sign of trouble, that way you can try to work something out before you’re in too deep. If you stay working with the original creditor, it’s likely they’ll help you work out a payment plan, or may even settle for less than what you actually owe. Understanding your legal rights and the consequences of not paying will help you effectively work with all types of creditors.
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At Total Loan Company, we listen, we understand, and we help. So if you find yourself in financial trouble, never hesitate to reach out.
Contact us today, or call us at (855)222-0209.