Managing debt overload

Consumer tips
 

Debt collectors 

There are two types of debt collectors:

• Debt-collection agencies collect debts owed to third parties (this includes attorneys who regularly collect debts); 
• Creditors are firms or people to whom you owe money directly. 

The Federal Fair Debt Collection Act regulates collection agencies, while the New York State Debt Collections Procedures Law covers both agencies and creditors.

Contact restrictions 

Under federal law, a debt-collection agency is allowed to contact you in person, by mail, telephone, telegram, or fax. Personal contact is restricted to between 8 a.m. and 9 p.m., unless you agree to other times. These agencies are prohibited from contacting you at work if the agency knows that your employer disapproves. You may request in writing that the agency stop calling you. Upon receiving your letter, they may contact you to acknowledge the letter or inform you that the agency or creditor intends to take some specific action. State law prohibits contact at unreasonable hours or frequency. It also forbids creditors or agencies from contacting your employer prior to obtaining a judgment.

Disputing a debt 

You must dispute the debt in writing within 30 days of the agency contacting you. The agency is prohibited from contacting you again until it can verify the debt.

Harassing or threatening tactics

Debt-collection agencies may not: 

• use obscene or profane language, or threaten to harm you or your property
• advertise your debt for sale
• call without identifying themselves

False or misleading representations

Some strong-arm tactics used by collection agencies or creditors include threatening clients with actions that the creditors may not legally make, or pretending they have official duties when they do not. Debt collectors may not: 

• threaten to collect more money than the debt owed 
• falsely claim or imply they are representing a government action or entity 
• send communications that appear to come from a court or other government entity 
• falsely claim that you will be arrested or charged with a crime

Budget planning agencies 

Many people find their way out of debt by working with a credit counselor. Also called debt-management or budget-planning services, these agencies help consumers pay off unmanageable debt. They can contact creditors to arrange lower fees and interest rates, and can create budget and repayment plans. Nonprofit companies will frequently base their fees on a sliding scale, or charge a flat or monthly fee for service. Unfortunately, some will offer quick fixes that could end up putting you even deeper in debt. To find the right service for you: 

• Work only with someone who is licensed by the New York State Department of Financial Services.
• Ask up front about the fees they will charge, and what services the fees will cover.
• Look for a community group, employee assistance program, or credit union that offers low cost counseling.
• Compare services and fees from three services to find the right plan.

Beware of services that: 

• tell you to stop making payments, unless those payments are continued through your debt repayment plan. Not paying can damage your credit rating and lead to lawsuits 
• charge fees based upon your promised debt reduction 
• encourage you to borrow against your home to pay off debts