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Financial Education for Everyone

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July 31, 2009

Like many folks, I recently had an awkward encounter with a debt collector.

Someone had stolen my credit card number and used it to charge a hotel stay. Thanks to my card's zero liability policy the charges were quickly reversed and I didn't have to pay anything. But unbeknownst to me, the thief had booked an additional reservation, so my cancelled card was later charged a no-show fee.

Long story short: After trying to collect the $350 bill from the thief's non-existent address, the hotel turned the claim over to a collection agency. Fortunately, I was able to unravel the mess and got the unpaid collection removed from my credit report.

Not everyone is so lucky, however. Although the vast majority of debt collectors operate reputably, the Federal Trade Commission receives tens of thousands of complaints each year about overzealous collectors overstepping their legal bounds.

Here are a few precautions you can take:

First, recognize that you are responsible to pay off legitimately incurred debt. If you realize you may have difficulty paying a bill, however, proactively contact the lender to work out a payment plan. Don't wait for them to contact you and certainly don't ignore their calls or correspondence; that could harm your credit rating.

You have certain rights whenever dealing with debt collectors. For example, under the Fair Debt Collection Practices Act, they cannot harass you by:

  • Using abusive language or threatening arrest.
  • Calling before 8:00 a.m. or after 9:00 p.m.
  • Contacting you at work if you tell them your employer disapproves.
  • Contacting others, except to verify where you live and work.
  • Revealing to others that you owe money.

Once a debt collector contacts you:

  • Get the names of the person calling and his/her agency, its address and phone number.
  • Take detailed notes of all conversations, correspondence and pre-recorded calls, noting names, dates and times.
  • You may request that all subsequent contact be handled by mail. Send this request – and all further correspondence – by certified mail, return receipt requested.
  • Request that all conversations be followed-up in writing.
  • Document any false, misleading or harassing statements and include them in your correspondence.
  • Ask for full details about any debts the collector claims you owe, including dates, amounts, lender's name, etc.
  • Instruct that you be the only person contacted, unless you wish an attorney to be involved.
  • Retain all records indefinitely in case of future disputes.
  • Have all agreed-to repayment plan terms verified in writing, including promises to remove or adjust reports to your credit history.

If you feel you've been targeted in error, tell the collection agency, in writing, that it has the wrong party and to stop contacting you. If they can't provide proof, by law they must cease collection efforts.

And finally, don't pay bills you don't owe just to make the collector go away; that's considered acknowledgement that you are responsible.

The Privacy Rights Clearinghouse's "Debt Collection Practices: When Hardball Tactics Go Too Far," offers great tips on navigating the debt-collection process, including your privacy rights, sample letters and where to turn for help (privacyrights.org/consumer-guides/debt-collection-and-your-rights).


This article is intended to provide general information and should not be considered health, legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.