All collection agents have to follow the state laws where they are placing the phone calls that regulate collection efforts, and for a debt collector calling across the country, this all can be very confusing. Oftentimes, collection agents will utilize software to guide them and help them remember each state’s laws.
But the most important piece of legislation that debt collectors must follow is the Fair Debt Collection Practices Act, a federal law written in 1978 which strictly guides collection activities. Bear in mind that the FDCPA only applies to third party collection agencies, not the original creditors. If a third party collection company buys a debt, then they essentially become the creditors. But, according to law, even if a debt has been purchased, a third party debt collection agency must still abide by the FDCPA.
The Federal Trade Commission watches over the collections industry, and has the ability to penalize collection agencies for not complying with the FDCPA. But because they are so busy, the FTC usually does not get involved with general consumer complaints. Only after they receive a substantial amount of complaints against one particular agency will they notice a pattern that could lead to action against it.
If a third party collection agency buys a debt, this does not make the amount of money “new” again. There is a seven year credit reporting time limit that is based on the date of the original delinquency with the original creditor. The time limits for filing lawsuits are also founded on this same date.
After these statutes of limitations run up for filing lawsuits and credit reporting, a third party debt collector still has the ability to send out letters and make phone calls about the debts. Somebody may question why a consumer might pay back a debt if they are not faced with a negative penalty, and the reason is usually that they are not aware that the debt has an “out of statute” status.
Mallory Megan works for Rapid Recovery Solution and writes articles on medical collection agencies.
