How to stop debt collectors – What they don’t want you to know
I thought that it was time to address this topic specifically. I have been getting questions on www.jdfn.com and some of my other sites about collection agents/collectors. We are all experiencing this or know someone who might be experiencing this very upsetting situation. I personally am not immune; before I made my first million I was going to the school of hard knocks. I believed that my way was the only way and that no one could tell me a better way to accomplish something.
Well, that didn’t work out to well for me, so I went into the Marine Corps. But I had my share of bill collectors following me around. Then after the Corps, I got into real estate and made my first million. One small problem, no one told me about money management or diversification. Okay, maybe they did and I didn’t listen. Come to think of it, my grandmother always told me “not to put all my eggs in one basket.” That didn’t sink in until I found myself over-leveraged in the real estate market in the late 90’s. The banking and lending industries were similar to what we are experiencing now although just not as bad.
Thus my next bout with collectors. Since then things have gone pretty well but I have learned a lot more about consumer debt and what bill collectors can and cannot do. I won’t cover all of the specific issues in this one post, but what I will talk about is something very specific. Something that collection agencies don’t want you to know about. Are you ready? The consumer debt statute of limitation. That’s right there is a statue of limitation on consumer debt.
Here is a little information that you may want to follow. First and foremost, get the collection agency to stop calling you. This doesn’t mean the original credit grantor but the collection agency. You have two options to get the phone to stop ringing. First, hire an attorney and then let the collection agency know. As soon as you do this the collection agency can no longer contact you at all. They must go through your attorney. If they don’t, they will be in violation of the fair debt collection practice act.
Second, send a “cease and desist” letter notifying the collection agency that you want to have all telephone communications stopped and all further communications in writing. This also serves as a record in writing of what they are telling you. When they call you they normally make all sorts of threats that are most often illegal in nature. (See a sample of a cease and desist letter at the end of this post.)
Now for the best part, the statue of limitations, all states have their own laws regarding consumer debt and what the statute of limitation is for such a debt. The statute of limitations on a written contract is 5 years from the date of last activity such as the last payment on the account. If they get a judgment prior to this they can extend that date indefinitely. The statute applies to the state where the debt originated.
The statute of limitations on debt in Florida puts a time limit on the amount of time you can be sued for a debt.
Oral Contract: 4 years
Written Contract: 5 years
Promissory Note: 5 years
Open-Ended Accounts: 4 years
To be clear, the statue of limitations starts ticking on the day of your last activity on the account with your original creditor. This date of last activity can be found on your credit report. If it is older than 7 years it most likely won’t be on your credit report and shouldn’t be on your credit report. In either case, it would be more than 5 years old so it would be a candidate for the statue of limitations.
Anytime you take an action with an account, the statute of limitations is restarted. Making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account can restart the statute of limitations on an account. You will want to be careful to not restart the clock,
For example, let’s say you have an old debt and a bill collector is harassing you. If the debt is close to being 5 years old, but you know the debt is your and you want to pay it off. You should wait until the 5 years is up, then you have a much better chance of negotiating a lower settlement amount as the collection agency doesn’t have a leg to stand on to sue you in court for a judgment on the debt. They may try but they won’t get past summary judgment because of the statue of limitations. You still owe the debt and they may still send you letters but they won’t be calling you because of your cease and desist letter.
Some debts don’t have a statute of limitations. This includes federal student loans, child support in some states, and income taxes.
It does not:
Prevent the debt from being placed on your credit report. Credit reports will or are supposed to keep accounts for 7 years, so if you have a late payment or a charge off, 7 years later the negative post on your credit report should be taken off. The debt won’t be erased; if the debt is legitimately yours, you still owe it.
Some excerpts that are pertinent to you from the Fair Debt Collection Practice Act:
§ 805. Communication in connection with debt collection
15 USC 1692c
Fair debt collection practice act
(c) CEASING COMMUNICATION. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—
(1) To advise the consumer that the debt collector’s further efforts are being terminated;
(2) To notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor
§ 805 15 USC 1692c
(3) Where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification shall be complete upon receipt.
(d) For the purpose of this section, the term “consumer” includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
§ 808. Unfair practices
15 USC 1692f
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
A sample Cease and desist letter:
*********************************
Debt Collector’s Name
Address
City, State Zip
Re: Account Number
Dear Debt Collector:
Pursuant to my rights under federal debt collection laws, I am requesting that you cease and desist communication with me, as well as my family and friends, in relation to this and all other alleged debts you claim I owe.
You are hereby notified that if you do not comply with this request, I will immediately file a complaint with the Federal Trade Commission and the [your state here] Attorney General’s office. Civil and criminal claims will be pursued.
Sincerely,
*********************************
Armed with this information you should be able to, at minimum, start answering your phone again. No more hearing the phone ring and automatically get a feeling of anxiety. When the phone rings it won’t be that harassing bill collector anymore, and if it is there are lots of attorneys out there just waiting to sue them for breaking the law. It’s now time that you empower yourself with the knowledge to take control of your financial security.
All my best
James Dicks
I really appreciate your information. I am getting bothered to no end for a bill I do not owe from 2004 for $36.00! I was specifically told by the company that they will not stop calling until I resolve the matter, and needless to say they were extremely rude. I am so glad to have learned about the cease and desist letter. Thank you!
Glad it helped!