Individuals or businesses that collect debts on behalf of creditors are known as debt collectors. Federal and state regulations govern them to make sure they behave morally and legally. The Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Bureau (CFPB) are the two main federal statutes that govern debt collectors. Additionally, the regulations governing debt collecting tactics vary from state to state.
In order to safeguard customers from unfair debt collection techniques, the FDCPA was passed in 1978. When trying to collect a debt, it forbids debt collectors from using intimidation, threats, or fraud. Additionally, the legislation mandates that debt collectors give consumers certain disclosures, such as the debt’s amount, the creditor’s identity, and the consumer’s ability to challenge the debt.
The CFPB is a federal organization tasked with defending consumers in the financial sector. The FDCPA and other federal consumer financial laws may be enforced by it. Additionally, the CFPB has the authority to look into debt collectors and file lawsuits against them for breaking consumer protection laws.
Each state has its own rules that govern the procedures for collecting debt in addition to federal legislation. These laws differ from state to state but often provide for debt collectors to be licensed and adhere to particular rules while trying to collect a debt. Laws that restrict the amount of interest that can be added to a debt are also present in several states.
How much time is allowed for debt collection? The type of debt and the state where the obligation was incurred determine how long it will take to collect the debt. A statute of limitations, or time limit, governs how long a creditor or debt collector may prosecute a consumer for an unpaid debt in the majority of jurisdictions. State-by-state, the statute of limitations might be anywhere between three and ten years.
Note that the statute of limitations only affects a creditor’s capacity to bring legal action against a consumer for an unpaid debt. It does not stop a creditor or debt collector from making further attempts to collect the debt, like making phone calls or writing letters.
Despite what many people think, after seven years, your debt does not disappear. The seven-year fallacy is a misconception about how long bad information can stay on your credit report. The majority of bad information, like charge-offs and late payments, can only stay on your credit report for seven years after the initial infraction.
Nevertheless, depending on the state where the debt was incurred, the statute of limitations on a debt may be more than seven years. There are however some debts that have no statute of limitations and can be recovered indefinitely, such as federal student loans and taxes.
What Exactly Is a Certified Debt Buyer? A corporation that buys charged-off debts from creditors or other debt purchasers is known as a certified debt buyer. These debts, which may be several years old, are often sold for cents on the dollar. The FDCPA and state debt collection laws, as well as other federal and state rules governing debt collectors, must be followed by certified debt purchasers.
A person who has successfully completed training and earned certification in debt management and financial counseling is referred to as a certified debt specialist. They assist customers who are having financial difficulties and may work for a nonprofit or a for-profit business. Consumers can seek assistance from certified debt counselors in developing a budget, negotiating with creditors, and developing a debt management strategy.