Debt collection is a big business, and consumers often feel powerless when facing debts that they cannot repay. Thankfully, there are numerous federal laws limiting the activity of creditors and the collection agencies they hire in order to better safeguard the rights of debtors. There are limits to when debt collectors can call someone and where they can contact an individual. There are also rules about the type of language they use. Collection professionals should not threaten or abuse people. Most companies seek to comply with the law because they risk financial penalties for major violations.
However, they are often eager to manipulate loopholes when trying to coerce people into paying. Reporting someone’s debt to the credit bureaus is one way to force people to address their financial obligations or suffer consequences for the failure to do so. Some collection companies also intentionally seek to manipulate the rules about credit reporting to have a longer-lasting negative impact on individuals.
What are the basic protections for debtors?
Those who have outstanding debts or missed payments on their credit history know that those blemishes will affect their credit score and therefore their personal credit opportunities for multiple years. Delinquent accounts and other issues included on someone’s credit report are subject to a seven-year statute of limitations.
Creditors and collection agencies can only report missed payments and delinquent accounts for seven years. After that window of time elapses, the blemish will come off of someone’s credit report. However, some collection companies purchase debts that have already fallen off of someone’s credit report and then will seek to report those amounts again as separate debts owed to their business.
Other times, collection agencies may intentionally delay notifying the credit bureaus of someone’s delinquent account or bad debt to use the credit consequences of those financial matters as leverage against the person who owes the debt. It is therefore important for people to validate each debt that leads to collection activity and to check their credit reports frequently for signs of inaccurate information.
It is sometimes possible to remove certain blemishes or to take legal action against companies that intentionally violate debt collection and credit reporting laws. Seeking legal guidance to learn more about the rules that protect consumers from abusive financial conduct can potentially help people rebuild their lives after a period of financial difficulty.