Credit, Debt, and Collections Legal Issues for Consumers
If you are concerned about accumulating debt, swamped by relentless collections calls, or facing the prospect of bankruptcy, you are probably dealing with significant stress and uncertainty. However, you also should know that you have rights as a consumer during this time. You are entitled to be free from abusive or deceptive practices, as well as exploitation based on your financial troubles.
Collections
Many debt collectors tend to be aggressive in attempting to collect a debt. These may be first-party collectors who reached the original agreement with a debtor, or these may be third-party collectors who are pursuing a debt that a debtor owes to a different entity. The federal Fair Debt Collection Practices Act (FDCPA) limits what a third-party collector and sometimes what a first-party collector can do in trying to collect a debt. For instance, they cannot misrepresent the details of the debt, contact the debtor at work after being told to stop, or call a debtor during certain hours of the night. Some fraudulent collectors may even pursue consumers for debts that they know do not exist, expecting that the consumer will pay them to stop the harassment.
Credit Reporting
You should periodically check your credit history so that you can identify any problems that may arise. Federal law gives consumers a right to receive an annual credit report for free. If you find adverse information on your credit report, or if you feel that your credit score is inappropriately low, you can contact the credit bureau responsible for the report. (This is usually Equifax, Experian, or TransUnion.) They use automated processes to handle most of their data collection and aggregation, so incorrect information can affect the ultimate result. For example, identity theft or fraud might place unwarranted red flags in your report. The federal Fair Credit Reporting Act (FCRA) allows a consumer to dispute information in their report and get it corrected if appropriate.
Foreclosures
If you default on payments to a lender or contractor, you may face foreclosure. This refers to the process of taking title to an individual’s home and selling it to pay the debt. (If the sale price does not suffice to pay off the debt, the debtor still may be liable for the remainder.) You may have certain alternatives to foreclosure, such as negotiating a short sale of the property or modifying the loan terms. These generally depend on the discretion of the lender, however, and you should be alert to the potential for mortgage fraud by individuals who claim to be able to get this type of modification on your behalf. Sometimes a homeowner can challenge a foreclosure if it was based on fraud or a violation of the contract with the lender.
Student Loans
Unlike most forms of debt, student loans are extremely hard to discharge in bankruptcy except in rare circumstances. You can choose among various types of federal student loans and private student loans, but you will want to review the repayment terms carefully and make sure that you feel confident about being able to keep up with them. Former students have access to the same protections as other consumers who are facing debt collection.
