My Way Credit

Fair Debt Collection Practices Act (FDCPA)

The FDCPA is the consumer protection act designed to prohibit abusive practices by debt collectors. The FDCPA specifically defines a collector as any person that collects debts owed to others, and may include attorneys that collect debts on a regular basis. Note that the language indicates “debts owed to others”, and therefore excludes original creditors from its scope.

Getting Started

When a debt collector initiates a collection effort they must send you a written notice indicating: 1) How much you owe, 2) The name of the creditor to whom the debt is owed, 3) Notice that unless you, within thirty days after receipt of the notice, dispute the validity of the debt or any portion thereof, the debt will be assumed valid by the debt collector, 4) That if you dispute the debt in full or in part within thirty days, the debt collector will obtain verification of the debt and mail it to the consumer, and 5) Upon written request within thirty days, the debt collector will provide you with the name and address of the original creditor, if different from the current creditor.

Exercising Your Rights

Your rights under the FDCPA, as indicated above, allow you to dispute the validity of the debt in full or in part within 30 days of receiving written notice. Your legal rights, as in all credit repair efforts, are the tools that you will use to establish the facts. An extra benefit of disputing the validity of the debt is that the collector must cease all communication until they have furnished the documentation that you have requested. In many cases, especially with older debts where documentation could be hard to obtain, you may never hear from the collector again.

Bringing an Attorney into the Picture

If you have an attorney, the debt collector must contact the attorney instead of you. This is a good way to put an end to abusive collection calls. The collector will undoubtedly be on best behavior when communicating with an attorney and a good deal of grief may be avoided. In many cases unscrupulous collectors sense weakness in the consumer and take advantage, often acting illegally to extort payment. We highly recommend hiring an attorney for anyone that feels out of their depth and uncomfortable when speaking with a pushy collector.

Cease Communication Letter

If you would like the debt collector to stop contacting you altogether you can send a letter asking them to stop. Once they receive your letter, they are allowed to contact you only one additional time for the purpose of telling you that they intend to take a certain specific action. This strategy is often recommended by credit repair companies, but be aware that in some cases, especially with recent or large collections, your letter may push the collector into taking legal action to recover, such as filing a lawsuit.

Statue of Limitations

Statutes of limitations (SoL) for collecting debt are typically far less than the SoL for reporting on your credit report. Debts may be collectable through the courts for as little as three years. If a debt is beyond the SoL the collector may attempt to pursuade you to pay, but as he cannot enforce the collection, his efforts have no “teeth”. Communicate your knowledge of the SoL to the collector. As an aside, should a collector attempt to collect a post-SoL debt by filing a lawsuit, you must appear and raise the SoL defense to have the lawsuit dismissed. It is also crucial to understand that the SoL clock starts with the original creditor. For most states the clock starts on the day you made your last payment on the account. This date can not be reset by the passing from creditor to collector, or from one collector to another. But beware that in some states partial payment can reset the SoL clock. Check your state statutes of limitation, easily found on the internet, or speak with a credit repair expert before assuming anything.

Bad Behavior

The FDCPA prohibits a wide range of specific inappropriate behavior by collectors. Prohibited practices include contacting you before 8 a.m. or after 9 p.m., calling you at work if you tell them that your employer does not approve, use of threats, obscene language, repeated calls designed to scare you into making payment, implying affiliation with the government, or implying that you have could be arrested for not paying a debt. In the credit repair business we are regularly asked about specific collection practices. Many of the stories we hear detail outrageous and illegal behavior…

Pick up the Phone

If you feel that a collector is behaving in an improper or illegal manner, the ultimate resource for answers is the FTC. If you find yourself on the telephone with a collector in such a situation it is entirely appropriate for you take careful notes: Ask their name (the FDCPA prohibits the use of false names), ask them to repeat anything that you are uncomfortable with, and then call the FTC. They welcome phone calls. The toll-free number is (877) FTC-HELP. That’s easy!

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A good credit report is becoming increasingly important in today’s world. Good credit most often will allow savings on everything form mortgage loans to car insurance rates in addition to opening up possibilities for securing loans for auto purchases and, of course, home loans. Inadequate credit, however, will negatively impact your life in the opposite way. There are several companies which provide credit repair services but it is also possible to repair ones own credit, often with superior results, if one adopts a sound credit repair strategy.

Debt validation should be your initial step when undertaking a strategy of credit repair. This involves obtaining your credit history from the three major credit reporting bureaus, Equifax, Experian and Trans Union. Upon receiving these reports look at each and every item in the reports. Check for any errors or discrepancies. If there is anything that you think is on your report that shouldn’t compose a letter to the corresponding creditors asking for debt validation. If they do not furnish you written proof of the debt within thirty days they are obligated to withdraw the entry from your report and furnish documentation to this effect.

Once you have removed any incorrect information from your reports write down all remaining outstanding debts. Get in touch with any collection agencies that appear on your report and agree upon a payment schedule with each of them. Make sure it is within your means. Also ask if they will contact the credit reporting agencies to withdraw the negative entry after you have paid the account in full. They are generally amenable to this as long as you make good on your payment commitments.

While you are paying down your outstanding debts, according to the schedule you have set up, you can also set about to establish new credit. One way to do this is to acquire a secured credit card with your bank or credit union. You do this by depositing a sum of money, which serves as collateral against a credit card with a credit line equal to the amount you deposited. It functions the same way as a debit card but is in truth a credit card and will appear on your credit report as such. Every month make a nominal expenditure on the card and repay it as soon as the next bill comes. In doing this you will show a positive payment entry each month for this account.This will consistently increase your score.

Repairing your credit will certainly be worth the time and energy you put into it. You will reap the financial benefits of doing so for many years to come. Not only will repairing your credit allow you to obtain loans for very expensive purchases, such as a new auto or, perhaps, your dream home, but a higher credit score will also save you money. The amount of interest that lenders levy on loans are a direct result of your credit score. The better your score, the lower your interest rate. Additionally, there are other ways that a good credit score can favor you. Your car insurance rates, your apartment rent, and many others can also be affected by your credit score.

Technorati: credit repair, credit, credit inquiries, credit rebuilding, credit score, fico score, credit card, credit report, equifax, experian, trans union, bankruptcy, debt consolidation, mortgage, mortgage loan, debt validation

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Earlier this morning, President Bush announced a plan to help aid Americans struggling with expensive adjustable rate mortgages. Up to 80,000 borrowers would qualify for a special refinance program despite making late payments on their current mortgages. It's unclear exactly how this plan will work; our team is working hard to investigate the details.

General consensus right now predicts that this aid plan will be a mere drop in the bucket. An estimated 2 million mortgage are said to be at risk for foreclosure. At best, this plan would only assist 4% of the borrowers in trouble.

While we wait for more details to emerge, let's speculate wildly about some of the other aid plans that might have been proposed during the early draft stages. It is still Funny Money Friday after all:

• Free $200 subscriptions to ForSaleByOwner.com all around.
• Assign Miss South Carolina as Foreclosure Czar.
• Air drops of "stop foreclosure" books over Florida, Sacramento and Los Vegas.
• Sell US real estate market to China. Half off!
  
• Generating affordable renewable energy by harnessing Jim Cramer's skyrocketing blood pressure.
• 0% interest rates for everyone! What could possibly go wrong?

Feel free to add your own lost bailout ideas in the comments section below.  Have a great Labor Day weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.