Know rights in dealing with debt

With the economy on the fritz and consumer debt at record-high levels, does it surprise you that debt collection complaints are on the rise? The Better Business Bureau logged 18,000 complaints in 2007, up 26 percent compared with 2006; the Federal Trade Commission logged 70,951 in 2007, up 2.5 percent.

Given that there are millions of contacts made by collectors each year, those numbers don't sound terribly high. But what if you're the one being harassed? Being sworn at and called names?

"Consumers need to be able to communicate in a safe environment with debt collectors," said Rozanne Andersen, general counsel for the American Collectors Association, an industry group based in Edina, Minn.

So how do you do that?

--Deal with the debt collector. It's a common gut reaction to let mail pile up for credit card bills or collection notices you can't afford to pay. But doing so won't make the debt disappear. In fact, failing to respond after several weeks can become an admission of guilt.

If you have any doubts about what a document means, contact a consumer attorney through the National Association of Consumer Advocates (www.naca.net). If you have questions about your rights, consult with an attorney well-versed in collections law.

Also, there are first-party and third-party collectors. An example of a first-party collector is the in-house collections department for a credit card company, and they're generally not covered by the Fair Debt Collection Practices Act. A third-party collector, who collects money on behalf of an outside company, is covered under the collections act.

And take careful notes of your conversations, suggested consumer attorney Sam Glover, whose http://caveatemptorblog.com site is loaded with tips.

--Know your rights. Under the Fair Debt Collection Practices Act, a debt collector can't swear at a debtor or make false statements designed to bully someone into paying. Making threats about "dire consequences," such as arresting someone for failure to pay debts, taking away their house or ruining their reputation are no-no's. So are phone calls made at inconvenient times or places, or calls at work if it's known that the employer doesn't allow them.

Collectors also must stop contacting a debtor who writes a letter telling individual creditors to cease communications, but that won't stop them from filing a lawsuit in an attempt to collect a debt.

Read the act's fine print at www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf.

--Be careful what you say. When collectors call, they will read a "mini-Miranda" warning: "This is an attempt to collect a debt and any information obtained will be used for that purpose." Then they'll try to collect as much information as possible. They'll try for work details, bank account information, even Social Security numbers to help them keep tabs on you and your money.

Don't give out your Social Security number or your financial details unless you are ready to claim the debt. And never promise a payment you can't make, said Tara McCarthy, executive director of Financial Rehabilitation Inc., a financial counseling nonprofit.

--If it's not your debt, don't pay. Thanks to technology, there's a growing debt-buying industry in which collectors buy debt from companies for pennies on the dollar. The debts can be old or inaccurate, meaning more people are being contacted about debt that already has been settled or is invalid to begin with.

The act requires collectors to send written notice of the amount of money owed and the creditor's name, plus details about the next steps in the collection process, within five days after the first contact. If it turns out you don't owe the dough, send the collection agency a letter within 30 days of receiving the first notice saying it's not yours to stop the collector from contacting you again without proof of the debt.

--Harassed? Make a complaint. Tell the Federal Trade Commission (www.ftc.gov or 877-382-4357), the Better Business Bureau (www.bbb.org) or your state attorney general's office.

The American Collectors Association (www.acainternational.org) is the national trade group for third-party collectors. The association also investigates ethics complaints about its members because there is a "very real need for debt collectors to take the public's perception of the industry very seriously," Andersen said.

Reach Kara McGuire at kara@startribune.com.