The Law

• A debt collector can be a collection agency or a law firm that acts as a debt collector for its clients. Even if you owe a debt, you still have rights. The Fair Debt Collection Practices Act places certain restrictions upon the practices of debt collectors and gives you certain rights. This federal law applies to third-party debt collectors. It does not, however, apply to companies that collect their own debt in-house.
  
  

Significance

• Under the FDCPA, debt collectors are only allowed to call you from 8 a.m. to 9 p.m. unless you say otherwise. They must send you a collection notice in writing within five days of the initial contact with you by phone. Also, the collector is prohibited from calling your place of employment once you have told them not to do so. The collector must validate a debt once you request it, which means they must prove that it belongs to you. You have up to 30 days from receiving the collection notice to request debt validation.
  
  

Considerations

• The FDCPA isn't the only federal law that restricts the actions of debt collectors. The Fair Credit Reporting Act allows debt collectors to place a collection account on your credit report, but only if the debt is valid. If the collector is unable to validate the debt, the collector cannot place it on your report. If they do, the credit bureau must remove it because the FCRA only allows accurate data that can be verified to appear on a credit report. Also, a collection account can only remain on your credit report for up to seven years.
  
  

Warning

• Debt collectors can assist companies in obtaining outstanding money owed, but not all debts sought by collectors are legal. Watch out for zombie debt, which is debt that has passed your state's statute of limitations so that you are no longer liable for payment of it. Some debt collectors purchase old debt for pennies on the dollar, then try to collect from consumers who don't know their rights. The collector may try to sue you for it, but if you appear and inform the court that the debt has expired, the judge will dismiss. If, on the other hand, you fail to appear, the judge will issue a default judgment against you, and you then become legally responsible for that debt, which means the collector may be able to garnish your wages or seize money in your bank account.