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Common Debt Collection Myths

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Acting on common debt collection myths can get you into financial and legal trouble. Learn your rights and what debt collection agencies are allowed under federal and state law. The Fair Debt Collection Practices Act (FDCPA) protects your rights, enforced by the Federal Trade Commission (FTC) and other government agencies. If you're in debt and uncertain what to do, you might be eligible for cheap or free credit counseling from local government offices or non-profit organizations.

Debt Collection Agency Claims and Implications

Debt collection agencies may use deceitful practices to try to trick you into unnecessarily paying debts or otherwise take advantage of you. While you may not know it, as a consumer, you have a right to request written proof from a collector to verify that you owe a debt and that the collector has the right to collect on it. Collectors must identify themselves as such. They can't send you papers that appear to be legal documents but aren't. Harassment, deception and other unfair practices as defined by the FDCPA are forbidden.

Avoiding Debt Collection

Companies may offer to negotiate with your creditors, but they can't legally and honestly guarantee that your creditors will agree. Debt settlement or management companies may be scams or charge unfair fees for talking to your creditors (which you can do yourself). They might even advise you to stop making payments, which can cause late fees, credit score damage and anger your creditor. If you approach creditors promptly and attempt to pay your debts as soon as possible, they may accept temporarily reduced payments or other measures to help you improve your finances. Debt consolidation may help, but if you use a mortgage or other secured loan understand the risk to your home or property. While arbitration is less formal than court proceedings, it may still be binding. In 2011, the FTC reported some concerns about the impartiality and fairness of arbitration proceedings. If you have the choice to do so, research the arbitrator before making a decision.

Common Misconceptions

Debt collectors may act in a harassing manner or threaten jail time, but this is illegal. Collectors can't threaten to seize your property or wages unless they have both the legal right and the intention to do so, which is unusual. Collectors can't send you to jail (although you may serve jail time if you don't show up for a court date) and they rarely have the right to seize property without a court judgment--unless the loan is secured with that property as collateral. Learn the laws that uphold your right to fair debt collection to avoid falling for scare tactics or deceptions that could cost you a great deal.


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