With more than 40 million borrowers owing $1.2 trillion in student loan debt, debt collectors abound throughout the U.S. Many have duped borrowers into paying inflated fees, misrepresented minimum payments, assessed illegal late fees, collected on debts that weren’t owed, and charged for services that borrowers can get at no cost. Due to unethical behavior, five firms recently lost their contracts with the Department of Education for misleading clients and using unethical and/or illegal behavior to collect on debt.
Yet the problem persists: Overeager debt collectors use any and all means to collect outstanding balances, including aggressive tactics prohibited by the Fair Debt Collection Practices Act (FDCPA).
The Consumer Financial Protection Bureau (CFPB) — a consumer watchdog and independent government agency — took over as the supervisory authority to oversee debt collectors with more than $10 million in annual receipts. However, since this only includes about 60% of the industry’s annual receipts, there are still a wealth of small players and independent collectors who operate under the radar.
Consumers with student loans — or any type of debt — are afforded certain rights and protections under the FDCPA. As part of our Know Your Rights series, here we cover specific debt collection practices that are prohibited:
- Refusing or failing to provide documentation verifying the debt, including name of the creditor and how to proceed if the debtor feels the debt is not owed. Here’s a sample debt validation letter.
- Failing to notify the debtor in writing within five days of contacting him/her about the debt.
- Continuing to contact the consumer after the consumer has stated in writing that he/she does not owe the debts.
- Threatening legal action that cannot be legally taken or is not intended to be taken; in other words, just using it as a scare tactic.
- Falsely claiming that debts cannot be relieved in bankruptcy.
- Failing to cease communications with consumers after receiving written notice that he/she desires no further communications.
- Discussing a debt with any party other than the debtor, the spouse, or the individual’s attorney.
- Seeking amounts not owed, or payment for debts whose statute of limitations has expired. Caution: See “Zombie Debt That Just Won’t Die” for more cautions when older debts are involved.
- Implying with false threats that nonpayment of any debt will result in arrest or imprisonment of the debtor. Caution: In certain circumstances, these threats may be lawful and the creditor may intend to take such action.
- Falsely representing that the collector is an attorney or a member of the government or bankruptcy court.
- Contacting the debtor by phone before 8:00 a.m. and after 9:00 p.m. local time.
- Furnishing any form knowing that it will create the false belief that a person or organization other than the creditor is participating in the collection of a debt.
- Falsely claiming the debtor has committed a crime.
- Continuously contacting the consumer with the intent to annoy, abuse, or harass.
- Contacting the consumer on the job after being informed that this practice is unacceptable or prohibited by the employer.
- Claiming that papers sent to the debtor are legal forms if they are not, or aren’t legal forms if they are.
- Applying payments received toward debts that are in dispute.
- Publishing the consumer’s name or address on a “bad debt” list.
- Contacting a consumer directly when the collector knows the consumer is represented by an attorney.
- Using abusive or profane language.
- Charging excessive collection fees not expressly authorized by the agreement creating the debt or permitted by law.
- Making false reports on the consumer’s credit report or threatening to do so.
Your rights are at risk when debt collectors exceed their authority. For more information, go to FTC.gov: Debt Collection for actions that are restricted, the CFBP for new ways to combat harmful debt collection practices, or report a complaint at CFPB: Debt Collection Complaint or FTC Complaint Assistant. Watch for more strategies to defend your consumer rights in future posts..