Collecting on debts can be a minefield. Not being able to get the money owed to you can imperil your business and can be extremely frustrating. However, there are rules for getting your money, and in our litigious society, people are quick to sue if they think they've been wronged. Whether they can take you to court depends on whether or not you know all of your state’s collection laws.
The Federal and State Difference:
There are federal rules for collecting debts to prevent debtors from being harassed. These rules are set out by the Fair Debt Collection Practice Act and apply to anyone collecting debts for others in the whole country. Family, personal and household debts come under these rules. These generally prohibit lying to the debtor, calling the debtor at inconvenient hours, threatening violence to the debtor, and threatening to have a debtor arrested. They also disallow contacting the debtor by postcard or depositing a post-dated check early. The Act allows that some states will let a collector take additional charges and to have wages garnished. The Federal Trade Commission enforces these rules. States can make more stringent rules to cover other debts and debt collectors, and generally enforce the rules through the state's Attorney General. Arizona is an exception. It classifies violations as misdemeanors and lets county prosecutors deal with them.
Common State Rules:
Many states have their own Fair Debt Collection Act that mirrors the federal one in many respects. Other times they have their own definitions of debt collectors and harassment. California, for instance, disallows calling a debtor multiple times a day. State rules can also cover different sorts of debts. Knowing what is required in your state is important in order to collect debts legally. There are some common threads in state rules.
#1-They generally prohibit threatening to hurt the debtor, and lying about the amount owed.
#2-They can define 'inconvenient hours' more strictly: frequently anytime between 9 pm and 9 am.
#3-Many states also outlaw sending paperwork that looks as though it comes from the government. Georgia, for instance, won't allow paperwork that looks like a warrant. Arizona disallows paperwork that mimics any part of the judicial process.
#4-Many states require that debt collectors have licenses. Illinois, Arizona, and Louisiana all mandate this, for instance.
These are just the most common rules. Some states are far more strict about what you can and cannot do to get your money back. The rules for debt collection for individual states can generally be found on the state's consumer protection websites. The State Attorney General’s office can also help in this regard. The Federal Trade Commission has its own website and had their rules up on there.
If you have any questions, you can contact us at any time, and we'll be glad to help you navigate this frustrating process legally.