Do you open it? Do you send it back? Read on to find the answer to common questions one may have after receiving a debt collection letter in the mail and make sure you’re protected. The following will help you understand whether you’ve received a legitimate debt collection letter and what to do if it’s legitimate or not.

1. How Do I Know if a Collection Agency is Legitimate or a Scam?
2. How Do I Find Out What Debt I Have?
3. How Do You Know if You Have Debt in Collections?
4. What Do Debt Collection Agencies Do?
5. Is there a Debt Collection Statute of Limitations
6. What Are My Rights with Debt Collectors

How Do I Know if a Collection Agency is Legitimate or a Scam?

Many calls consumers get about their debts are indeed scams. There are a lot of ways consumers can find out whether a person or company (agency) trying to collect a “debt” is legitimate or not. Keep in mind there are genuine times when legitimate and legal collection agents do use the tactics described below (and thus act illegally but technically you may still own the agency the debt) so you may have to consult with a lawyer or search the online to find any information about them. The Federal Trade Commission has posted their D-List of banned debt collectors so that’s one place you can start.

• The caller threatens the consumer. Legitimate callers won’t threaten the consumer with arrest if they don’t pay a debt. Callers who claim they are associated with law enforcement should be considered suspicious and are rarely legitimate.
• The debt collector doesn’t explain the basis of your debt. Debt collectors are required to identify themselves and identify the debt. If the debt doesn’t sound familiar, then the consumer should continue to question the caller about the debt and finally hang up and note the time of the call and number if possible.
• Debt collectors should give their phone number and mailing address. If they don’t, then they are also suspect.
• Debt collectors can ask how you to pay the debt but they shouldn’t ask for personal financial information like your bank account number.
• Consumers shouldn’t give credit card information, Social Security information or other financial information unless they know 100% that the caller is a legitimate collection agency.

Otherwise, the caller may use the information to steal from your bank accounts and make unauthorized charges. They might take out new loans and charge them to you; create false accounts and/or write bad checks.

If you think the caller may be a fake collection agency; ask the caller for their name, phone number, company address, company name and their professional license number. You can also ask the caller to verify the debt in writing. Verification both over the phone, and in writing should identify your account number, the creditor, the amount of the debt and notice of the consumer’s rights under the Fair Debt Collection Practices Act (FDCPA) .

Even if you’ve received all the information above, but your instincts are still telling you there’s a scam going on, contact the creditor directly and quote your account number. If all is legit, you should be transferred to an agent ready to take your call.

How Do I Find Out What Debt I Have?

There are various ways to determine your debt. For starters, many debtors keep their own personal records of what they owe. Even if they don’t know the precise amounts or the account numbers, they usually know the names of the creditors. So debtors can start by asking each creditor for an accounting of the debt. The accounting should include the name and address of the creditor, the account number, when the debt started, the amount of the debt and whether any efforts to collect the debt have started. Any and all efforts should be identified.

• Secured debts for most consumers are usually their mortgages and car finance loans. These creditors should have records of what you owe. The difficulty is that sometimes the creditor sells their claim to another creditor and tracking down the new creditors can take some work. Most credit card statements indicate the amount of the debt as do most bills for medical services.
• Business debts should usually be easy to verify by reviewing your business records to see what loans you’ve taken out and who gave the loans. Consumers can then contact the party that gave the loan to determine what is due.
• Consumer utility bills are usually sent on a monthly basis. Consumers can also call the utilities that provide service to their residence and ask for the amount that is owed.
• Taxes are due on a yearly basis. If you’re unsure about what taxes you owe, you can check with your local tax agency, your state tax agency and the Internal Revenue Service and ask for an accounting of which years you owe taxes and in what amounts. If you haven’t made your tax filings current, then you need to prepare them.

A second way to review your debts is to examine your credit report. There are credit bureaus like Experian, Equifax, and TransUnion that get information on your credit. These agencies will have the records for debt that was reported.

You can Google these names to get the name and address of the service so you can then write for your credit report. The record is kept on your credit report for a preset number of years depending on the type of action. Personal judgments normally are erased from your credit report after 7 years. Bankruptcies are erased after 10 years. Consumers are entitled, by law, to a free credit report once each year.

A third way is to check the local courthouse to see if there are any actions or judgments against you that have been recorded. Normally, if you provide your name and any aliases, the court can show you through a computer printout what’s on record against you.

Under the Fair Debt Collection Practices Act, any time a collection agency tries to collect a debt the collection agency has to inform you that you have the right to have the collection agency validate the debt. Validation means identifying the creditor and the amount of the debt.

The best way is to consult with a consumer attorney who will run the right checks to determine all your debt obligations.

How Do You Know if You Have Debt in Collections?

For starters, most collection agencies will send you a written notice identifying the debt and identifying the creditor and asking you to make full payment. These collection agencies will often call to ask you about the debt as well. When calls are made, the debtor has the right to ask the collection agency to identify themselves. The debtor can also ask to verify that the debt is validated.

Consumers can also check with all the creditors they know – secured and unsecured, personal and business and ask whether the debt has been referred to a debt collection agency. Creditors are required to let consumers know who is trying to collect the debt and where and how the collection agency can be contacted.

Many collection agencies report their efforts to collect to the three main credit bureaus. Consumers can get a free credit report from one of the credit bureaus (or pay a small fee for a credit report). The report will indicate which collection agencies have contacted the credit bureau.

Some collection agencies proceed to a court action. Here the creditor will file a complaint or a confession of judgment to try to collect the debt. When this happens the consumer will be personally served with the court papers. The court papers should identify the creditor, the basis for the debt and the amount of the debt.

What Do Debt Collection Agencies Do?

Creditors will first try to resolve the payment of a bill directly with the debtor. When the bill isn’t being paid and correct payment arrangements aren’t made or kept, the creditor will often ask a collection agency to try to collect the debt. The benefit to the creditor is that they can continue their normal business (medicine, car repairs, retail sales, or any other business reason) while the collection agency tries to collect the debt. Secured creditors for homes and mortgage may refer debts to collection agencies as may many unsecured creditors.

In return for the convenience of having a collection agency try to collect the money due, the creditor will agree that the collection agency be paid. Payment can be based on a percentage of the debt collected (such as 50%), it can be based on a flat fee arrangement such as $250 for each item referred or a combination of both.

There are often different collection agencies for different types of debt. For example, some companies only handle medical debts.

The creditor will then try to collect the debt in two basic ways.

• The first is by letter. The letter should explain that the collection agency is trying to collect a debt, identify the collection agency, identify the creditor and state the amount of the debt. The letter, according to the Fair Credit Debt Practices Act, should also inform the consumer that the debtor has the right to request validation of the debt. Validation includes identifying the creditor and the amount of the date. It should also indicate how the debt was incurred.
• The second collection method is by phone calls. Collection agencies may get your phone number from the creditor. They may research it through the Internet or through the white or yellow pages. Once they have your phone number they can call debtors and ask how the debtor can make payment (after they have properly identified themselves and the reason for the calls). There are restrictions on how and when the calls can be made. The caller has to be civil and the calls can’t be during sleeping hours.

Creditors will normally try to establish a payment plan if the debtor can’t pay the debt in full. The creditor should then confirm the plan. Once the plan is established, the creditor will normally send out monthly reminders of the amount still due and the monthly payment still due. If the monthly payment isn’t made on time, the creditor will then likely call the debtor to find out why the payment was missed and discuss a new payment arrangement.

Creditors will usually report the collection effort to the three credit bureaus. If the debt is not paid, then the collection agency will normally refer the debt back to the original creditor who will have to decide if it/he/she wants to take legal action against the debtor.

Is there a Debt Collection Statute of Limitations

A statute of limitations on debt is a law that says the creditor has to sue you to pay the debt within a preset number of years or forever lose the right to bring the claim. State and federal legislatures have statutes mainly out of fairness. As time goes by, people forget what happened. If they remember, key witnesses may not be available or may have even died. Many times the person who the creditor worked with originally can’t be found. Other circumstance may make it hard for a fair resolution of the dispute to take place if too much time goes by.

Most credit claims are based on state contract law. Every state has statutes of limitation for contract actions. The length of the statute of limitations often depends on how the debt was incurred and whether it is a secured debt or an unsecured debt. Debts that are based in writing are often treated differently than debts that are oral debts.

The time for the statute of limitations to begin running is usually when the debtor first misses a payment, not the date of the original loan. Many states have a statute of limitations for consumer debts and contracts of between three and six years. Some states may have as much as ten year statutes of limitations. Debtors will need to check with a state lawyer to determine the proper statute of limitations. The lawyer (and applicable statute) will normally be in the state where the debtor currently resides though there may be exceptions.

Collection agencies may try to collect the debt even though it is barred by the statute. The best bet is to see a consumer debt lawyer who will handle the dispute for you. Consumers can also dispute the debt in writing and ask for verification of the debt. Consumers who owe a time-barred debt generally can do one of three things.

• They can refuse to pay the debt on the basis that it is barred by the statute of limitations.
• They can agree to a partial payment. This can be tricky though because the agreement may create a whole new obligation to pay which prevents the use of the earlier statute of limitations defense.
• They can agree to pay the whole debt. Sometimes the creditor will take less than 100%. The debtor may feel a moral obligation to pay. The debtor should make sure the settlement resolves the whole debt and get a formal release from the creditor.

If a debtor tries to collect a time-barred debt, the consumer can also file a complaint under the FCDPA.

There are also limits on how long a debt collection can stay on your credit report. As a general rule collection efforts can only stay on your credit report for 7 years from the date of the initial delinquency. Judgments stay on your record for 7 years too from the date of the judgment. Bankruptcies stay on record for 10 years.

What Are My Rights with Debt Collectors

Debt collectors have a number of direct rights under the FDCPA (Fair Debt Collection Practices Act) – a debt collection law. The Act (one of several collection agency laws) was passed in 1977 and is enforced by the Federal Trade Commission. The purpose of the act is to make sure debtors have an ability to know the debt collection agencies and to be able to handle attempts to collect the debt in a calm and reasoned manner instead of being undue pressure because the collection agency is abusive or unfair.

What the FDCPA doesn’t cover

The FDCPA covers personal debts only. It doesn’t cover business debts. Common personal debts are home loans, car loans, credit card balances, medical bills, retail debts and other family purchases.

Debt collectors cannot call any time of day or night they wish. Specifically, they cannot call between the hours of 9 pm and 8 am. This is meant to make sure debtors have some free time to sleep and to attend to family duties. Debtors also have the right to tell collectors that they cannot call the debtor at work. Debtors should take the extra step of telling the collector in writing if they don’t want work calls.

Collection agencies cannot deceive the debtor. They must identify who they are and that the contact is about collecting a debt. They cannot pretend to be a law enforcement agency, a government agency or a lawyer. In addition to phone calls and letters, emails and text messages, that otherwise meet the FDCPA rules, are allowed.

If, after you’ve spoken to the debt collector, you do not want to speak to the collector any more you can notify them in writing to stop. Please know that while you can tell them to stop this may result in the collection agency telling the creditor that you do not want to pay the debt.

In turn, the creditor then may begin legal action. Consumers who want to stop the calls should write the letter and send it by certified mail, return receipt requested to make sure they have proof the letter was sent. The letter should stop the communications from the collection agency except that the collection agency may let the debtor know that the creditor does intend to sue for the debt.

Debtors who have an attorney should tell the collection agency they have a lawyer. The collection agency is then bound to speak directly with the attorney and they must cease all direct contact with the lawyer.

Creditors can only communicate with third parties, and just once, to try to find your phone number and address. They can’t tell the third parties about the underlying debt obligation.

Debtors have other rights under the FDCPA which are explained more fully in the Fair Debt Collection Practices Articles. These rights include specifying what the collection agency can and can’t say, whether your wages can be garnished, stopping harassing phone calls, and your rights if you think a collection agency violated the FDCPA.