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Debt Collection Laws – Debt Collectors and Creditors

If you are being threatened with a debt collection lawsuit, or if you are being harassed or sued over a debt by either a debt collector or an original creditor, you should know that there are some laws in place that could help you. This article will briefly discuss a few of the sources of legal rights you may have.

The difference between “Debt Collectors” and “Original Creditors”

First, a distinction that is very important in the law: the difference between debt collectors and original creditors. An “original creditor” is an entity (the law calls it a “person,” but it could be a human or a business) that extended credit to you in some way. For present purposes, it could also mean someone you owe money to in a non-credit transaction, and also means “servicers” of loans. Debt collectors are “persons” a significant part of whose business is the collection of debts due to other people.

Laws pertaining to Original Creditors

Because original creditors have some connection with the public other than debt collection and are therefore at least somewhat vulnerable to negative public opinion, the law gives them much more latitude in dealing with people who owe them money. They are not, however, permitted to assault you, obviously, or engage in other extreme and “outrageous” behavior. Where that line is drawn, however, differs from place to place. Some jurisdictions have allowed original creditors to post your name on a “hall of shame” board, for example, but I’ve never heard of anyone being allowed to chase you down the street calling you names. It’s vague, I know.

Laws do prevent anybody from defaming you (publication of false, seriously derogatory information), and this would include the publication of false information to your credit report. By and large the rule is, that all the basic rules apply to creditors, but very few special ones do. There might be particular laws in your jurisdiction, though, so you must take that with a grain of salt.

Laws pertaining to Debt Collectors

Debt collectors don’t have the “civilizing” connection to the community that most businesses do, and so the law is much more stringent regarding them. The rule there is that the Fair Debt Collection Practices Act makes “unfair” or deceptive debt collection techniques illegal. Again, the law is rather vague, but this time its vagueness is in favor of debtors. Debt collectors try many sneaky and underhanded tricks, and many shockingly abusive and outrageous tricks too, and the law is designed to try to cover them all. For further discussion, please see other articles.

Other sources of legal protections include state merchandizing practices acts (which mostly apply to marketing techniques) the Federal Truth in Lending Act, the Uniform Commercial Code, and the Federal Trade Commission. Other resources could also include the Better Business Bureau and State Attorneys General.

For a much more complete understanding of the debt law – especially if you are being sued, check out the Debt Defense System. If you are still in negotiations and want more information about what that might mean or how to go about it, check out the Debt Negotiation and Settlement System. And of course this website has a wealth of information available for free. Be sure to contact me if you have questions.

Modern Debtor Prison – States Do Dirty Work for Debt Collectors

Sometimes there are traps for regular people set by predatory debt collectors. This is one of them.

Scam Alert

There is a disturbing trend in debt collection these days: getting the state to do the dirty work of intimidation and collection. In some jurisdictions, notably Illinois, debt collectors are actually managing to get people who supposedly owe them money thrown into jail. This is obviously a dirty trick and happens primarily because the debt collectors are managing to set cases for trial where attendance in mandatory; whereas in most civil cases failure to show up for trial results in a default judgment, in these cases the judge issues a warrant for arrest.

The subject of our Scam Alert today, however, is a little different. A scam involves trickery and deception, and that is what is happening in Missouri and elsewhere. In some places, Payday loan companies and other vulture companies are issuing short-term loans. What they do is require a post-dated check for the repayment.

Of course if you have a job – and keep it – and the post-dated check is made with that in mind, then when the money rolls in, you just pay off the debt. Of course you do it at heart-breaking interest rates, but at least theoretically that is what you bargained for, and there’s no real confusion about what the deal is costing. The problem comes in if something keeps you from getting that money you expected. In most loans, if you fail to make a payment you can be sued, and generally it is not a fun thing to be sued. If you have written a post-dated check, however, if you fail to make the payment (and cover the check), you are immediately subject to a civil penalty doubling the value of the check (in Missouri), and you may also be prosecuted to passing “bad checks.” Many lawmen are willingly allowing themselves to become the hitmen for these loan companies.

This is a “scam” because no one tells the people borrowing the money that failure to pay could result in an instant doubling of the loan or criminal prosecution, so payday loans, which charge such a high rate to account for the fact that people so often cannot make the payments, gets an extra level of security against default. And foists the risk of criminal enforcement onto people who don’t know what is happening.

It is also a perversion of the law. Bad check laws were created to protect people who trusted the people writing them checks – writing a check is, legally, a sort of guarantee that the check-writer has the money to pay for the check in the bank at the moment the check is written. Writing a check without the money in the bank is a type of fraud. But when a payday loan company accepts a post-dated check in exchange for a loan, they know the money is not there. There is no fraud when the check is written – and fraud requires that the intent to rip off the victim be present at the time the action which does rip them off (writing the check) is done. What’s happening here is that people who made a mistake about having money at a certain point in the future are being thrown into jail for that mistake. And the people on the other side of the transaction – the payday lenders – are perfectly aware that their customers have trouble with money – that’s who they target.

It is morally totally wrong for this to happen. But it is happening. So the lesson is, never pay for a loan – any loan under any circumstances – with a post-dated check. If the money isn’t in the bank, do not use a check.