Debt collector rules: Six borrower protections to know
CBS News says borrowers can demand proof, check old debt deadlines and avoid costly mistakes when collection calls start.
By Deshawn Carter · Sports Writer
3 min read
Debt collector rules can give borrowers more room than urgent letters and repeated phone calls may suggest, according to a CBS News personal finance report on what people should know before paying an overdue balance.
The report says debt collection is governed by federal and state laws, with limits on what collectors can do and deadlines that can shape a borrower’s options. Those rules matter for people trying to settle an account, challenge a debt or stop constant contact.
What are debt collectors allowed to do?
Debt collectors may contact borrowers about unpaid debts, and CBS News says they may still seek payment on some older balances. Their power is limited by law, including rules on harassment, threats, lawsuits and wage garnishment.
One key protection: borrowers can ask a collector to prove the debt is real. CBS News says federal law gives consumers 30 days after first contact to send a written debt validation request. That request requires the collector to provide documentation showing the debt is legitimate, accurate and theirs to collect.
That step can matter because debts are often sold and resold, CBS News reports. Records can become inaccurate, and in some cases a collector may not be able to produce enough proof.
Old debt may have legal limits
CBS News says some debts can become legally unenforceable in court after the statute of limitations expires. Collectors may still contact borrowers about those balances, but their ability to sue may be restricted.
The age of the debt matters before a borrower acknowledges it or makes a payment. Depending on state law, CBS News says certain actions can restart the statute of limitations, giving collectors more legal options.
Wage garnishment also has limits. CBS News reports that most debt collectors generally need to sue, win a court judgment and obtain a garnishment order before taking money from a paycheck. The report notes exceptions, including federal student loans and unpaid taxes.
Collectors have limits on calls and threats
Debt collectors are restricted in how they communicate with borrowers, CBS News says. They generally cannot harass, threaten or repeatedly call someone to pressure them into paying.
The report says collectors also cannot call during certain hours or falsely claim they can have a borrower arrested or seize property without the proper legal process. Borrowers who believe a collector has broken the law should keep records of calls, voicemails, letters and emails, according to CBS News.
Ignoring collection notices can also backfire. CBS News says borrowers do not have to answer every call, but failing to respond to legitimate notices can lead to escalated collection efforts. If a collector files a lawsuit and the borrower does not respond, the court could issue a default judgment.
That judgment may allow further collection steps permitted by state law, including wage garnishment or bank account levies, CBS News reports. Responding early may create more room to negotiate a payment plan or settlement before legal action advances.
Can debt collectors settle for less?
CBS News says full repayment is not the only possible outcome for some collection accounts. Borrowers facing long-term financial hardship may be able to negotiate forgiveness of part of the balance through a lump-sum settlement.
The report says borrowers can negotiate on their own, while a reliable debt relief company may help and often results in savings of 30% to 50% on the original balance. CBS News also cautions that debt forgiveness can carry tax consequences, credit score effects and costs that borrowers should understand before agreeing to a deal.
This story draws on original reporting from CBS News.