Community articles > Collection Agency > FAQs Related to Collection Agencies
FAQs Related to Collection Agencies
How are collection agencies regulated?
Collection agencies are regulated by the Fair Debt Collection Practices Act, which imposes many restrictions on collection activities. However, the FDCPA applies only to third-party collection agencies and not to the original creditors collecting their own debts.
Can first party collectors lose their exemption from coverage under the FDCPA?
Yes, the original creditors collecting their own debts can come under the purview of FDCPA if they use an in-house collection agent, but suggest to the consumers that the collection is actually being carried by a third party. The FDCPA may apply to them as a result of the misrepresentation.
What Restrictions Are Imposed On Collection Agencies By The FDCPA?
The FDCPA has imposed certain restrictions on debt collectors, these include the following:
- Debt collectors can not contact you at unreasonable times. As per the FDCPA, unreasonable time for contact is before 8:00 AM or after 9:00 PM.
- Harassing, oppressing, abusing you or using obscenity, racial slurs or insults in connection with the collection of debt is prohibited by FDCPA.
- The person who is trying to collect the debt can not lie or conceal his or her identity on the phone.
- FDCPA prohibits the collection agencies from contacting you at work in spite of a request by you that they should not contact you at work. In addition to it, they can not inform your employer the reason behind the call, unless first asked by the employer.
- Debt collectors can only communicate with a third party such as a relative, neighbor, or employer for the purpose of acquiring location information about the debtor. Co-signers to the debt, however, may be contacted by the debt collector.
- While gathering information about your location, they can not give out any kind of information regarding the debt. Debt collectors are also not allowed to contact you or the third party via post card or use any kind of notation, symbol or language on an envelope that shows they are a debt collector.
- Please note that a debt collector can refer your case to an attorney or to report your debt to a credit reporting agency, in such case he can warn you. However, according to the FDCPA, debt collectors can not threaten you with actions which they do not intend to carry such as: wage garnishment, threatening you with arrest, repossession harming your score or other false threats just to intimidate you.
What must a collection agency do while collecting the debt or What is a first written notice by a CA?
- The agency must mail you a written notice within five days of its first contact with you. This notice must notify you the total amount of money owed by you and the name of the original creditor to whom you owe the debt.
- The notice must also inform you that if you do not believe that you owe the debt then dispute it within 30 days. If you don’t dispute the debt within 30 days after you receive the notice, then the debt will be presumed to be valid by the debt collector.
- The notice must also include a statement that if you write back disputing the debt within 30 days, the debt collector will investigate and verify that the debt is accurate.
- The notice must also notify you about your right to ask for the name and address of the original creditor.
How can you stop receiving the collection letters and calls?
Collection agencies can ask you to pay off the bill through letters or else they can call you at home and ask you to payoff the outstanding balance. However, they must stop contacting you if you send them a cease and desist letter asking them to stop communicating with you.
After receiving a cease and desist letter from you, the collection agency can contact you only one more time to notify their actions: they will either tell you that they will stop contacting you or that they are intending to take legal actions against you.
Can a collection agency add interest on an assigned debt?
Collection agencies can add interest and late charges to the debt that is owed provided you had agreed for that in your original contract. If a collection agency demands interest charges then the amount should be shown as a separate amount from the principal. However, in many states like California, the Civil Code (sec. 3289(b)) authorizes a collection agency to add interest after default, even if the original contract says nothing about the interest charges.
