Debt collectors are often thought of as the bad guys. However, they have to follow certain rules when trying to collect a debt. Debt collection can be stressful, confusing, and even scary at times.
It’s important to understand how this process works so you know what to expect and what rights you have when a debt collector contacts you. Learn about the different types of debt collections and where you stand legally with this explorative guide.
What Is Debt Collection?
Debt collection is the process that a creditor goes through when trying to collect on an unpaid debt. The creditor or the original lender hires a debt collector to help them collect what’s owed. Debt collectors are often thought of as the bad guys, but they have to follow certain inkassoregler (debt collection rules) when trying to collect a debt.
This includes understanding what type of debt it is, the types of debt collectors, the laws concerning debt collection, and how long they can contact you.
Types Of Debt Collectors
There are three types of debt collectors:
* Government agencies- these include the IRS and the Veteran’s Administration
* Private collection agencies- when a company owes you money and you can’t get your money back from them, private collection agencies will attempt to collect on your behalf
* Law firms- these are typically used by businesses with small debts and they do not have the infrastructure or business knowledge to professionally work on larger debts.
What You Need To Know About The Collection Process
Debt collectors have a lot of rules they have to follow when collecting a debt. They can’t threaten you, harass you, or call you at unreasonable hours.
Debt collectors also have to follow certain procedures when attempting to collect the debt. This includes sending you a written notice within five days of first contacting you and providing an explanation of the debt and how it will be collected.
When collection agencies send a debt validation letter, it means they’re trying to confirm whether or not the amount is correct. It’s important not to ignore these letters because this could lead to legal consequences for both parties (the debtor and the collector).
Collectors are allowed to charge any fees related to the account if it’s been past 90 days since your last payment – but they cannot add interest or penalty charges. If you do agree on a payment plan with them, there should be no interest again on that balance as long as payments are made on time.
How To Deal With A Lawsuit
Debt collectors can take legal action against you if you are not able to pay your debt. If a collector files a lawsuit, you will have the opportunity to defend yourself in court. The most common types of lawsuits that debt collectors file is for:
- Breach of contract
- Violation of state or federal laws
- Tortious Interference