Home > Managing Debt > Can You Sue Your Debt Collector?

Comments 0 Comments

Most people don’t realize that debt collectors can’t cross a line set by federal law. For example, they can’t threaten you with physical injury; claim to be a lawyer if they are not; harass you or use foul language; nor claim to have arrest powers. The list is extensive. The Federal Trade Commission has published examples of prohibited actions by debt collectors. If the debt collector steps over that line, you do have the right to sue them.

The Fair Debt Collections Practice Act (FDCPA) is a federal law that stops debt collectors from using abusive, unfair or deceptive practices to collect from you. It was passed in 1977 when Congress determined that there was a need for federal regulation of debt collectors. The combination of an explosion in available credit and a downturn in the economy usually results in an increase of unpaid bills as consumers focus on priorities.

When a debt goes delinquent, most creditors will attempt to collect it themselves first. Usually that will mean a phone call to your home or a letter reminding you that you’ve missed a payment. After all, everyone makes a mistake or forgets sometimes. It’s something that happens. If the payment is not made and/or more payments are missed, typically you will incur a late charge or penalty of some sort. When the default in payments continues for a longer time things get dicey. Typically, the creditor will hire an outside company to collect the debt or just outright sell it off as a bad debt. Either way, you will see action from a debt collector.

‘Charged Off’ Doesn’t Mean ‘Paid’

Since credit reports have become widely available, the term “charge-off” has joined the consumer lexicon. When a debt goes unpaid for a long enough period of time, the creditor may decide to charge off the debt from its books. In very basic terms, that means the creditors got a tax deduction. If money is later recovered on that debt, that money becomes taxable income to the creditor even if it was the creditor’s money in the first place. However, that does not mean you do not owe the money. So if you see a charge-off on your credit report, you still owe the debt. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it. (You can get your credit reports for free once a year, here’s how.)

Some States Also Regulate Debt Collector Activity

In addition to the federal law, some states have also passed laws regulating debt collectors. While many of the laws are near mirror images of the federal law, some are a bit broader. For instance, Connecticut’s law not only covers the debt collection company, but the original creditor as well.

Important Tips on Lawsuits

If you plan to sue a debt collector, you need to act fast. Federal law only gives you one year from the violation to file the lawsuit. Since it takes time to get things started, don’t wait. Keep in mind that not everything you think is abusive may be covered by the law. Some additional tips:

1. Know who you are suing. Debts get traded more often than injured baseball players. Just because you got a letter from one company yesterday, it does not mean that the abusive phone call today is from the same company. If you are talking to a collector over the phone, get the details; name of the company, address where you might send payments (if you were going to pay), which creditor originally owned the debt if it was transferred and any other information you can get to identify the party. It is important that you keep detailed notes of every telephone conversation. It may become evidence later.

2. Communicate in writing whenever possible. When you talk to anyone, the details of that conversation become subject to the “he said/she said” game. But when you write it down and mail it out, the communication becomes a record. The same is true for everything the collector sends to you. Save it all. Remember that you are building evidence of abuse.

3. Keep good records. Not only do you want to communicate in writing, but you want to keep everything you have regarding the debt. All the original bills if you have not already thrown them out; all of your payment records, phone records, doctor bills, receipts of any expense that you paid while dealing with the issue. All of that is hard evidence of your claim.

What About Damages?

If the judge in the case determines that there is a violation of the law, you will get only $1,000 unless you can prove that you have been actually damaged. If you can prove you suffered damages like lost wages or medical bills because of the illegal collection practices, the judge can order repayment by the debt collector. You can also be reimbursed for attorney’s fees and court costs if you win.

Other Laws to Protect Consumers

An elderly married couple in Florida recently received a judgment of $1 million for abusive practices in violation of the Telephone Consumer Protection Act, another federal law designed to protect consumers. In short, it prohibits harassment by telephone or fax. The Consumer Finance Protection Bureau will investigate complaints against debt collectors. Your state attorney general may also have a department set up to deal with consumer complaints.

In addition to other federal laws to protect consumers, the individual states may have statutes that give added protection to consumers. For example, Connecticut has a fair debt protection statute that applies not only to debt collectors, but also the original creditors. You would have to check for the law in your specific state.

Finally, there is the prospect of a class action lawsuit. Even if your particular damages are not large, but a debt collector injures a large group of people by abusive practices, they can band together to sue a debt collector as a class and recover money for damages up to $500,000, or 1% of the collector’s net worth, whichever amount is lower. You should talk to a qualified attorney about the specifics of your claims.

More on Managing Debt:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team