legal rights against debt collectors

What Legal Rights do I Have Against Debt Collectors?

More than half of all Americans currently hold less than $1,000 in their savings accounts. One third of all Americans have nothing at all. Without a proper savings account, one that can cover all your bills for at least 6 months in the case of an emergency, a single extra expense can not only wipe out a savings account, but throw them straight into debt.

Does this suggest that most of America is irresponsible with their paychecks?


Why are Americans in Debt?

The most common reason people find themselves in debt is an unexpected medical expense, like an accident. With or without health insurance, a medical bill as low as $2,000 will not only wipe out any savings, but will also add an extra monthly expense that is not included in an already tight budget. Add to that lost wages and it is a quick and slick slide into debt.

Of course, this isn’t the only reason people go into debt. Poor financial management, misusing credit, and lack of education are often to blame. For example, the misunderstanding that a credit charge of $100 will grow to a bill of $120 or more if not paid off in full often leads to “make the minimum payment” offenders. Credit card companies love people who make that minimum payment; they count on them.

Both medical institutions and credit card companies can report you to the credit bureaus, not to mention cell phone providers, landlords, and student loans to name a few more. Once these companies are reporting you as delinquent, the debt collectors start calling. This begins to affect your credit score, which then limits your ability to rent a home, buy a car, and even get a job. The spiral can begin to feel endless. But there is hope.

If you’ve gotten yourself into debt, you’re not alone; and you still have certain rights that you may not know about.

Debt Statistics

The average American carries anywhere from $5,000 to $16,000 in credit card debt. The average college graduate owes $30,000 in student loans by the time he/she graduates. One in 10 Americans have over 10 credit cards in their name. Almost 1 million people file for bankruptcy every year (which doesn’t cancel out credit card debts and often fails to erase even some medical debt).

If you are in debt, you’re not alone.

With Americans having so much debt, you would think that most people would understand what they owe. Unfortunately, only about a quarter of people in debt have a clear understanding of who they owe and how interest is being accrued. And it’s no wonder they don’t understand it. Credit card agreements can be 20 pages long, full of legal jargon that a consumer may find confusing, misleading, or just plain boring. Instead of taking the time to understand what they’re agreeing to, most toss the agreement out and begin swiping.

More than 40% of American adults are having trouble paying off medical debt. Often times, medical debt is the result of a massive pile of bills that were unplanned and certainly far outside the monthly budget. The average cost of an unforeseen medical debt is almost $4,000. While some for-profit hospitals will work with you to lower your bills and even eliminate them in the best of scenarios, most hospitals do not have that ability. They can offer you on a payment plan, and while this is more easily paid than a large lump sum, it can still outspend your monthly income. You’re not just dealing with the hospitals and doctors, either. You’re often dealing with insurance companies and a long line of debt collectors, as well.

It isn’t always you who has the medical bills, either. Often times it’s a senior parent who is in need of assisted living, hospice, prescriptions, or other health-related expenses. In 2012 it was estimated that a couple in retirement age would need more than $230,000 to cover 75% of future medical costs alone. The annual average nursing home rate is over $80,000! While Medicare can help, there is a lot that it doesn’t cover. Your parent is not likely able to work or contribute to your household in any way and so, the debt becomes you problem (and continues to accumulate).

Who are debt collectors?

Generally speaking, a debt collector is any third party that is trying to collect past-due money you owe on behalf of the company to whom you owe it. If you are unable to make regular payments on a debt, a company will report you to a debt collector who will then take on the responsibility of obtaining the money. This is more cost-effective for the company itself, as it no longer must spend money and resource on pursuing payments on delinquent accounts.

Often times, debt collection agencies will “buy” your debt from the company for pennies on the dollar. This way, when they do collect your debt, they actually made a profit. It is also why debt collection agencies will offer you a settlement amount of less than your actual past-due amount; they paid the company so little that even a percentage of your debt would still be lucrative for the debt collector.

Each individual company can set its own policies for sending your past-due payment report to a debt collector. Some give you as long as 6 months, others as few as 90 days. These are terms you are responsible for knowing and understanding. A company is not required to make you aware of the fact that your debt is being sent to collections. Often times the company will report you to the credit bureaus, who determine your credit score, but if they don’t, the debt collectors are required to report that information.

In 1978, the government enacted the Fair Debt Collection Practices Act. This was the first time that companies and debt collectors were being held to a standard as far as debt collection is concerned. In some states, the practices included in this act are only applicable to the third party debt collectors; in other states, they applies to both the original company and the debt collectors. Either way, if you find yourself in debt, it’s incredibly important that you understand this act.

Before Your Debt is Sent to a Debt Collector

It’s important to note that there are a few steps you can take before your debt is sent to a debt collected.

  1. You should understand the company’s policy on debt. You may find this information in the literature provided to you when you acquired the debt or you may need to make a phone call to get answers to your questions.
    • How and when does the company determine you are delinquent?
    • After how many days past-due will the company report you to a debt collector?
    • Does the company have their own in-house debt collectors?
    • Does the company sell the debt? To which collectors?
    • Does the company report delinquency to the credit bureaus?
  2. Once you understand how close you are to being sent to a collections agency, contact the company directly to determine what, if any, negotiating there is to be done. Try offering a lower payment or negotiating new timelines. While a company will never appreciate you being behind on your bills, compromising on a lower monthly payment will still award them more in the end than selling your debt to a collector would. Most companies want to work with you, and many actually want to help you. Don’t be afraid to ask for help.
  3. If the company cannot offer to negotiate, this is the time to be proactive in other areas of your life. If your credit score is still average or above, take care of any purchases or job searches that might take your credit score into consideration prior to it being affected by your debt being reported. If you know you’ll soon need a new car, a new apartment, or even a new house, start the search sooner than later. Of course, this does not mean you should put yourself further in debt with a purchase outside of your budget, but it could mean a reasonable deal on a used car that can get you to and from work before your current car bites the bullet. Once your credit report is hit with debt, it will become harder and harder to obtain many basic things (even jobs and cell phones!).

After your Debt is sent to a Debt Collector

  1. If you debt goes to a collection agency, first confirm the exact amount you owe to the original creditor. You do not want a debt collection agency attempting to collect an amount that is higher than what you actually owe.
  2. Contact a lawyer or a free credit counseling organization. Not only can a credit counseling organization help you create a plan, they can take a lump-sum payment each month and distribute it if you owe multiple companies/collection agencies. They can also help you negotiate with collection agencies. The Financial Counseling Association of American and the National Foundation for Credit Counseling both have website that can help you locate a counselor near you.
  3. If you determine the debt being requested is in the wrong amount, from the wrong company, or any other incorrect information, you have the right to compose and send a letter within 30 days of receiving contact from the debt collector. The debt collector is then required to send you verification of the debt. If you find that the information in inaccurate, you can contact the Consumer Financial Protection Bureau and file a complaint.

Your Rights Against Debtors

You have certain rights when it comes to debt collectors attempting to gain payment from you. If you are not familiar with the law and how a debt collector must act to remain within the confines of the law, it is easy for you to be taken advantage of. First let’s discuss what a debt collector must do.

What Debtors Can Do

A debt collector is required to:

  1. Identify themselves. If you receive a phone call, letter, or email, the debt collector must identify themselves or the name of their company.
  2. Inform you of your rights. Debt collectors must inform you that any information they obtain while in communication with you can be used to collect your debt. They must also notify you that you have a right to dispute the claim against you.
  3. Provide the name of the Creditor. You should receive the name and address of the original company to whom you owed the debt so that you can research the validity of the claim.
  4. Supply proof of the debt. If you request it, the debt collector must provide you with verification of the debt amount and creditor in writing.

What Debtors Can’t Do

More important than what a debt collector must do is what a debt collector legally cannot do. Remember, despite owing a debt, you still have rights.

A debt collector cannot:

  1. A debt collector cannot harass you in an attempt to collect a debt. Harassment can include calling before 8am or after 9pm, speak or act aggressively (using vulgar or profane language), or call you at work.
  2. A debt collector cannot contact you if you’ve obtained a lawyer.
  3. A debt collector cannot misrepresent themselves as any type of law enforcement officer or lawyer.
  4. A debt collector cannot contact anyone else in an attempt to collect a debt on your behalf outside of your spouse or attorney.
  5. A debt collector cannot provide false information to you, other credit collecting agencies, or the credit bureaus.
  6. A debt collector cannot publish your name or identifying information as being associated with a delinquent debt.
  7. A debt collector cannot continue to communicate with you in any form of fashion if you dispute or refuse to pay the debt. (If you do, in fact, owe the debt, the collector can bring legal actions against you, but can no longer contact you directly.)
  8. A debt collector cannot threaten to take your property or charge you interest on top of the debt you owe unless either is done so legally according to the laws of your state.

These are not suggestions, mores, or best practices: these are laws. If a debt collector breaks any of these laws, you have the right to sue them in federal court within one year from the date the law was broken. Not only can you sue for damages (like lost wages or medical bills) accumulated as a result of the debt collector, a judge can require them to pay you up to $1,000 even without proof of physical damages. The judge can also require the collector pay your attorney’s fees and court costs.

While it is empowering to know that you have rights as a person who owes a debt, it is important to note that suing a debt collector does not absolve you of your legal responsibility to pay any debts you owe. Because the collector breaks the law does not absolve you of the debt.

What to do if you believe a debt collector is illegally contacting you:
If you have determined you do not owe a debt and a collection agency is unlawfully contacting you, contact the Consumer Financial Protection Bureau or the Federal Trade Commission. Your state might even have it’s own debt collection laws and your local Attorney general can help you determine your rights under your own state’s laws.


Debt can sound like a dirty word. It can feel embarrassing and uncomfortable. The truth is, almost everyone will find him or herself in debt within a lifetime. It is such a common of a phenomenon that the government has created systems and organizations to help you navigate it! You are not alone, and you can pay it off.

While it’s never too late to begin to climb out of debt, starting sooner than later is always preferable. Begin paying what you can on your debt, even a very small amount. Find a credit counselor who can help you make a plan. And if your debt does end up in collections, remember that you still have legal rights as you continue to make a concerted effort to make good on your promise.

Know your rights. Know what the law states is acceptable and unacceptable. Take responsibility, but do not allow debt collectors to act outside the confines of the law. No matter how small or egregious the actions of the collecting agencies, you still have rights. Make it clear that you will not be bullied and that you intend to make good on your promises.

Above all else, maintain your goal of becoming debt-free, even when it feels like you’ll never get there. The freedom that comes from climbing out of debt is unlike any other feeling, and using the tools to help you get there can help make the climb easier.

Disclaimer: Content found on has been created to be used for informational purposes only and help readers achieve a basic understanding of their finances and financial options. The content is not intended to replace or usurp financial advice from professional accountants, CPAs, etc. If you you’re seeking financial advice, always present any questions you may have regarding your finances to a professional. Never disregard professional advice because of something you read on the internet.

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