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The California Association of Collectors is the nation’s oldest and
largest statewide association representing third-party collection agencies.
Collection agencies are
businesses that collect past due bills and accounts for other persons or
businesses. These questions and answers will provide you with information about what to expect
and what you should do if you are contacted by a collection agency concerning a
consumer debt.
CAC members participate in
educational programs for both management and employees emphasizing legal issues
and practices regarding professional conduct in accordance with state and
federal law. The California Rosenthal Act
and the federal Fair Debt Collection Practices Act are two of the laws most
relevant to consumer rights with respect to
third-party debt collectors.
The federal Fair Debt Collection
Practices Act (FDCPA) and the state California Rosenthal Act were enacted with
the support of CAC and ACA International, CAC’s national
affiliate, to protect consumers from unfair and abusive collection practices.
The federal FDCPA regulates all third-party collection agencies handling
consumer debt (but may not apply to child support collections). The
California Rosenthal Act governs all consumer debt collections.
This information is not intended to
be a complete or official summary of either of these laws, but simply an attempt
to provide an understanding of the provisions of these laws as they pertain to a
consumer when contacted by a third-party debt collector, and the most frequently
asked questions following such contact.
Most of the information presented
here applies only to collection agencies. The association is not able to assist
in the handling of problems or disputes between a consumer and the original
creditor.
1. Must the creditor
(the business or person to whom the original
debt is owed) notify me before turning my account over to a collection agency?
The creditor generally is not
required to let you know it’s referring your account to a collection agency.
There are rare exceptions to this rule.
2. How can I find out what the bill is for?
Either in its first contact with you regarding an
unpaid bill or in writing within five days after that contact, the collection
agency must provide the following information to you: (a) The amount you owe,
(b) the name of the creditor, and (c) the process to follow if you dispute the
bill. The five-day notification period applies whether the collection agency’s
first contact with you is by telephone or in writing, but many agencies include
this information on their initial written notice, whether or not they have
telephoned first.
3. What do I do if a collection agency contacts me?
It is important that you respond as soon as possible.
If you don’t, the agency may keep trying to reach you to collect what they
believe is a valid debt. lf you legally owe the bill, you should arrange to pay it
if possible.
4. Why can’t I just continue making payments to the original creditor to
whom I owed the money?
In California, once the debt
has been assigned to the collection agency, it is the collection agency that is
entitled to receive all payments. The collection agency becomes the
"owner" of the debt you owe. The collection agency is responsible for
collecting the debt and is the only one who can agree to payment terms.
5. When can a collection agency call me?
An agency may only call at
hours presumed to be convenient for the debtor -- generally,
between 8 a.m. and 9 p.m. If these hours are inconvenient for you, you may ask
the agency to contact you at other times. There is no law that specifically
limits the number of calls an agency may make to you, but repeated calls over a
short period, which may be annoying or harassing, are prohibited.
6. Can a collection agency contact other people and
discuss
my bill?
Although a collector may call
others to try to locate you, he or she may not discuss your account or debt
status except for your spouse, attorney or person necessary to enforce a
judgment. He or she must give his or her name, but not the name of the agency
unless they are specifically asked for it.
7. Can a collection agency contact my employer?
An agency may contact an employer,
but only for the following reasons:
a. To
communicate with you at your place of employment.
b. To verify your location.
c. To garnish your wages once you have been taken to court and a judgment
was entered against you.
d. To find out whether you have medical insurance to cover a medical bill.
8. Can a collection agency contact me at my place of employment?
Yes, unless the debt
collector knows or has reason to know that your employer prohibits you from
receiving such communication. However, if you do not want to be contacted at
work, you can request that they not telephone or send you notices at work. Be
sure to make your request in writing to protect yourself. If the agency does
send you a notice at work, it must be marked PERSONAL & CONFIDENTIAL. If
you request no further contact at work and the agency is unable to contact you
at home, the agency may have no other option but to file a civil lawsuit for
the amount of the bill it is collecting.
9. How do I stop a collection agency from contacting me?
If you want to stop all
contact from the agency you may request that they not contact you again —IN
WRITING. Your letter should be sent by certified mail, "return receipt
requested," so you have proof of its delivery. Once the agency receives
your letter, its employees can only contact you one final time to explain what
action they plan to take. After that, contact must stop. Remember, though,
that if you request no further contact in any way, except for certain messages
allowed by law, you may leave the agency
with no choice but to file a civil lawsuit against you.
10. Does an agency have to accept partial payments?
No. A collection agency has
the choice of demanding the whole amount or taking payments on the bill. It
will want to know your actual ability to pay the debt.
The agency can set what it is willing to take for the
amount of the payments and how often you will be required to make them.
11. As long as I am paying something every month, doesn’t the
collection agency have to take my payment?
No. The agency’s
responsibility is to collect the debts assigned to it. The agency will want to
have payments made pursuant to an agreed plan, so it knows when to expect
payment, and when the debt will be paid in full.
12. The collection agency has agreed to take payments. Do
I have to sign
a contract?
You don’t have to sign any
contract with a collection agency. However, if the collection agency wants the
payment agreement to be in writing, they have the right to require you to sign
a contract as a condition of accepting payments. This can be a protection for
both of you as long as you make the payments under the contract.
If you make your payments on
time and pay the agreed amount, the agency cannot change the way they are
collecting the bill or demand more money. But, if you fail to make the
payments according to the contract, the collection agency could then demand
payment of or sue you
for the entire remaining balance, not just the defaulted payment.
The contract may also be in the
form of a promissory note. These are both legal documents by which you will be
bound — do not promise more than you can
pay, and do not sign one just to appease an agency. A contract is a legally
enforceable agreement.
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13. What about oral (unwritten) payment plans?
The same conditions apply to
unwritten agreements as do the written agreements. Both are contracts between
you and the collection agency.
14. The collection agency wants me to write postdated
checks or pre-authorize payments from my checking account. Do I have
to do this?
No, you are not required to
give postdated checks or pre-authorized payments to a collection agency. However,
many consumers and collection agencies have found that this is very efficient
means of structuring a repayment plan as it requires little ongoing
maintenance by either party.
Writing or accepting postdated checks or pre-authorized payments are not illegal so long as you plan to cover
them when they are cashed or presented. The agency is required to send a
notice of intent to deposit letter prior to deposit of any check.
15. May a
collection agency demand the consumer pay interest on an assigned debt? If so,
how much?
When assigned the debt by the original creditor,
the collection agency can demand and collect interest from the debtor to the
same extent that the consumer would be obligated to pay interest to the original
creditor. The obligation to pay interest is not changed by the debt being
assigned to a collection agency.
If a collection agency does demand and collect
interest, it should be shown as a separate amount from the principle when it is
first demanded from the consumer. Subsequently, each additional amount of
interest should be shown as a separate increase to the total balance due at that
time.
The obligation to pay interest exists whether a
contract you signed included a promise to pay interest, the contract you signed
was silent with respect to the amount of interest which would become due, or
there was no written contract for the monies, goods, or services you obtained
from the creditor. California law provides for these three situations, if there
is not a specified legal rate of interest, then it shall be 10 percent per
annum for debts incurred after January 1, 1986. A creditor or collection
agency may demand and collect a higher rate of interest if a written contract on
which the debt is based includes a provision for higher interest (i.e., credit
card company contract you signed provides for an 18 percent interest rate,
then the collection agency may demand and collect the 18 percent interest),
so long as that higher rate of interest could properly have been part of the
contract with the original creditor.
16. What if I can’t make the payments I agreed to make?
If possible, contact the agency
before you miss a payment or send a partial payment. Explain the problem and
what you plan to do to solve it and catch up on your payments. Many agencies
will work with you, especially if you’ve already made several payments on
time.
17. What if the bill has been paid, I do not owe the bill, or I am not
the person the collection agency is looking for?
If you do not owe the bill, or
if the bill has already been paid, send the agency a written explanation along
with copies of receipts, cancelled checks and any other information to back up
your claim. It is important to send your letter within 30 days after your
first contact from the collection agency. Once the agency receives your
dispute letter, it must stop further attempts to collect the debt until it
sends you written verification to show that you do owe the bill and that the
amount of the bill is correct. If you are questioning only a part of the bill,
the agency may not continue to collect on that part
until it has provided verification, but you must make
arrangements to pay the rest of the bill.
If you are not the person the
agency is looking for, write and explain the mistake. You may be asked to
provide a driver’s license or social security number to prove that you are
the wrong person. If you are unsure about your legal responsibility for a
debt, check with an attorney.
If the collection agency is
unable to obtain verification that you owe the debt, it may return your
account to the creditor and stop collection efforts.
18. Can a collection agency sue me?
Yes. The agency, represented by its counsel, may file a
civil lawsuit against you in Superior Court. A collection agency may not sue in small claims court. If a
judgment is obtained by the agency you may be liable for additional expenses
for court costs and/or attorney fees.
19.
Can a collection agency report my account to a credit bureau (i.e., Experian,
TransUnion or Equifax, etc.)?
Yes. Most collection agencies, though not
required by law, provide a brief period after receiving your account before reporting it to the credit bureaus. Therefore, it is important that you
make immediate contact with the agency to resolve the matter before any
negative information is reported about your past due account.
20.
What should I do if the agency has already reported my account to a credit
bureau?
If you owe the debt you should pay it. Payment
of the debt will allow the agency to report your account as paid in full to
the credit reporting agencies. If you dispute the debt you should send
written notification to the agency together with supporting documentation to
substantiate your position.
21.
If I pay a bill to the collection agency in full, are they required to delete
their negative report on my credit?
No. They are required to show it as "paid
collection." The credit reporting agencies prohibit deleting a reported
debt merely because it was paid.
22.
What if I have been the victim of identity theft and the debt is not mine?
There are certain steps you must take if you have
been the victim of identity theft. You can contact the California
Association of Collectors for more information about this subject.
23.
How do I file a complaint against an agency?
If you feel, after reading this information, that
your rights have been violated by a collection agency, you can file a formal
complaint with CAC. However, you should always try to work out any problems
with the collection agency yourself before you file a complaint.
You can
contact CAC if you have any questions about the material on this page or
want a complaint form sent to you.
To file a complaint,
download the
Consumer
Complaint Form
fill
it out and fax or send back to CAC. You can also call the Consumer Hotline at
1-800-316-2262.
The association can respond to
questions and provide you with information over the telephone on how to file a
complaint, but the actual complaint must be in writing. The complaint form
will ask you for specific information and will explain how your complaint will
be processed. Your complaint form will be forwarded to the agency’s owner.
NOTE: The association provides this service with respect to
third-party collection agencies. Complaints with creditors or credit reporting
agencies are not within the scope of this service.
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