What can I do if a collection agency won't honor a settlement agreement?

Q. I had a retail credit card that I stopped paying after I lost my job. The card eventually got sent to collections, and I later worked out a settlement to pay $400/month for three months. I paid the $400 for the first two months, but couldn't pay the full amount the third month. I called the collector and told him that I couldn't make the full payment that month. He agreed to accept $200 that month, and $200 the following month.

I sent them the $200 for that month, and then they sent me a bill for $1000. When I called to inquire about why my bill was now $1000, they told me that the collector who I made the agreement with no longer worked there and that they were not going to honor the agreement.

What recourse do I have now?

A. I regret to inform you that you're probably stuck now with a $1000 bill since you didn't get the settlement in writing. This happens all the time with collection agencies. That's why I always say get EVERYTHING in writing. A written agreement is enforceable by law, but not an oral agreement. And collectors know that. Even when you make an agreement with a collector over the phone, you should get them to send that agreement in writing before you make your first payment.

Can a debt collector come after me if I ignore their letters and phone calls?

Q - Recently I've been getting letters from a collections agency for medical bills that I incurred a couple years ago. The bills are the result of co-payments that I couldn't afford to pay after my insurance paid their portion. I've received several letters, and they now leave voicemail messages every day. Can they proceed with the collections process if I haven't responded to their phone calls and letters?

A - NEVER ignore a letter from a debt collector, because they do not need your consent to proceed with their collections activities, including filing a lawsuit against you, and then garnishing your wages. The best thing for you to do now is contact the agency IN WRITING and work out a settlement agreement. If you make the arrangement by phone, don't pay anything until you get the agreement in writing. Debt collectors have really short memories when it comes the arrangements they make with debtors.

Good luck.

Woman Files Lawsuit Against Debt Collector Over Posting on MySpace

When Paula Newland fell behind on her payments in early January on her 2005 Chevy Impala, the last thing she wanted to do was share that information on her MySpace profile.

In what appears to be the first lawsuit related to debt collection activities on a social network, the Michigan resident is suing two debt collection agencies and their principals for violating the Fair Debt Collection Practices Act (FDCPA) for, among other things, posting information about her indebtedness on her MySpace page. The lawsuit, filed on March 23, 2009, seeks damages in excess of $25,000 together with equitable and declaratory relief.

According to her complaint, Newland fell behind on her payments on a 2005 Chevy Impala in January 2009. Shortly thereafter, she alleges that the defendants began engaging in various harassing and abusive collection activities, including disclosing private information to her family, friends, and neighbors, publishing private information on her MySpace page, and threatening to "camp out" in front of her home "all weekend." The complaint doesn't describe what the defendants allegedly posted on her MySpace page.

The six count complaint alleges violations of the Michigan Collection Practices Act, federal Fair Debt Collection Practices Act, and Michigan Consumer Protection Act, as well as claims for Intentional Infliction of Emotional Distress, Intrusion Upon Seclusion, and Disclosure of Embarrassing Private Facts.


According to the FDCPA, Subsection 805: Communication with a Debt Collector, Every communication with the debtor must include the phrase, “This is an attempt to collect a debt, and any information obtained with be used for that purpose. This warning is referred to as the mini Miranda. This warning must be done on every contact with a debtor, or any other person that the debtor talks to about the debt.

Communications with Third Parties: The FDCPA recognizes that an individual’s financial obligations are their private business. As a result, all contact with third parties is strictly regulated:

A third party is anyone not legally responsible for the bill. This includes answering machines.

Unless the debtor has given direct VERBAL authorization to the collector, no third party may be informed of the nature of the collector’s call, including the amount of the debt, name of the creditor, or any other information pertaining to the nature of the debt. This includes communication with Credit Counseling Services, as well as Mortgage and Lending Institutions. (Exceptions without permission: spouse, Power of Attorney (POA), Attorney, Executor of Estate)

How do I dispute a collection action?

Your first contact with a collection agency is likely to be a telephone call. The law requires a collection agency to send you a written notice five days after it first contacts you. The FDCPA requires a collection agency to tell you how to contact the collector in writing.

The written notice must also tell you how to dispute the debt and give you the information you need to lodge a dispute. There are certain things to look for when a debt collector writes to you. Here are just some things that might lead you to write a letter to a collector:

• It is not your debt. (The collector has you confused with someone else.

• You are a victim of identity theft. (Someone used your identity to run up charges.)

• You already paid the debt.

• The creditor sent the bill to an old address, even though you told the creditor you moved.

• The collection agency says you owe more than you think or says you owe an exorbitant amount in fees and extra charges.

• You need to clarify your conversation with a collection agent.

Some things you would record in a letter to a debt collector:

• Promises

• Terms of payment

• Commitments to adjust entries in credit history

• Proper crediting of payments

• Instances where the collector failed to keep a promise to you or failed to at within the agreed upon time.

• Instances where the collector engaged in abusive practices such as threats, abusive language or contact with third parties.

What information should I include in a letter?

For starters, it is important to get organized, get to the point, and maintain a business-like tone. It is a good idea to include a date in your letter by which you expect to hear back from a collector, for instance, that either it is investigating your dispute or will no longer contact you about another person's debt. Usually, a date of two to three weeks is sufficient.

It is also very important to send correspondence to a debt collector by certified mail, return receipt requested. This way, you will receive a signed and dated notice that the collector has received your letter. Without confirmation, it may come down to your word against the collector. You may also want to fax your letter before mailing it.

Can a Debt Collector Contact Me on Sundays or Holidays?

Yes. A debt collector can call you seven days a week, including Sundays and holidays, but within limits. A debt collector cannot:

• Call you before 8am and after 9pm unless you agree;
• Call you repeatedly or use the phone to harass you
• Trick you into accepting collect calls or paying for telegrams
• Use obscene language, make negative comments about your character,
• or make religious or ethnic slurs.
• Call you at work if the collector knows your boss does not allow such calls.

May I tape record calls from the collector?

If the collector is verbally abusive when phoning you or engages in other practices in apparent violation of the law, you might want to gather evidence by taping the calls. Such evidence can be invaluable if you file a complaint with the authorities and if you sue the collector. Be aware that in a dozen states you need to obtain consent from all parties before taping the call.

What can I do if a debt collector violates the law?

Familiarize yourself with the FDCPA, and let the collector know that you know your rights. If you have exhausted all strategies in dealing with the debt collector and the collector continues to use illegal, unfair and abusive practices, you may file a complaint, sue the collector, or both.

Am I liable for the debt if I don't dispute it in 30 days?

The FDCPA (§1692g(c)) says failure to file a dispute does not allow a court to assume you admit liability for the debt. However, being able to establish that you did comply with all statutory requirements may greatly enhance your chances of success. Your goal is to establish the facts and convince the judge or others who decide the matter that you are credible and deserve to have the law applied with its full effect on your behalf.

Are attorneys subject to the FDCPA?

An attorney that regularly collects or attempts to collect consumer debts owed another, directly or indirectly, must comply with the FDCPA. The law also applies to attorneys who act as in-house counsel and who send dunning letters or make telephone calls on behalf of their employer/client.

Does a debt collector have access to my credit report?

Yes. The FCRA lists a number of "permissible purposes" for accessing your credit report. One purpose is for "...review or collection of an account..." (FCRA Sec 604(3)(A)).

If I co-sign a loan, can a debt collector contact me?

Yes, if the person who asked you to co-sign does not pay. When you co-sign a loan, you are guaranteeing that the lender will be repaid - either by the person who asked you to co-sign or by you.

I'm receiving phone calls from a collector. Can I stop the collection agency from contacting me by phone?

You can cease a collector from calling you by writing a letter to the agency telling it not to contact you by phone, not to call at certain times or locations, or not to make any further contact at all. This last request does entitle the collector to contact you one more time to inform you of what, if any, action it intends to take to collect the debt, but not to threaten you.

Does an agency have to contact me in writing before it calls me?

No. A collection agency may contact you first by telephone. Within five days after the phone call, the collector must send you a written notice telling you how much you owe and the name of the creditor that says you owe the money, and how to file a dispute if you don't agree that you owe the money.

A debt collector threatened to sue me and garnish my wages. Can it do that?

A collection agency can file a lawsuit to collect a debt. However, they cannot threaten you with a lawsuit if they have no plans to file one. Furthermore, no collector can garnish your wages without a judge's signature. The Constitution of the United States guarantees you "due process." This means that a collector must sue you and the matter must be heard before a judge before your wages can be garnished. Your employer will not garnish your wages until he receives an official document from the court ordering him to do so. Remember that most threats of this nature are bluffs; however, if you think the collector will carry out the threat, then work out a payment agreement before you get sued.