Federal Laws Governing Debt in the US

The major federal law covering the collection of debt from consumers in the United States is the Fair Debt Collection Practices Act. . This law covers debt from secured loans as well as other debts.

This is a federal law and it only covers the actions debt collectors may take trying to collect debts in other states. There are different laws governing debts and debt collection in every state. A person will have to check with his or her state government to see what these are because they can vary widely.

The laws governing debt from secured loans can vary widely as well. There are specific statutes and local laws governing pawnshop loans, home equity loans, mortgages and car loans in many areas. In some states, debtors may have more rights than others.

The FDCPA only covers consumer debt accumulated by private individuals. This includes debt from secured loans. It does not apply to debt incurred by businesses or by persons engaging in business activities. There are different laws that cover such debts. This act will cover any debt collector who tries to collect consumer debts across state lines.

FDCPA Rules for Debt Collectors

There are some rules that debt collectors must follow when they try to collect debts from secured loans across state lines. Debt collectors who do not follow these rules can be subject to lawsuits. Here the major rules those trying to collect debts have to follow:

  • Debt collectors cannot threaten violence or any other illegal action.
  • Debt collectors can only call you at your place of work if your boss gives them permission to do so.
  • Debt collectors cannot call a person between 9 p.m. and 8 a.m. local time.
  • Debt collectors cannot try to collect your debts from anybody but you. They can ask others for your contact information when trying to collect payments for secured loans.
  • If a debtor has retained an attorney, the debt collector must direct all communications to the attorney.
  • Debt collectors cannot threaten action they do not have the legal power to take.
  • Debt collectors can threaten garnishment.
  • Debt collectors cannot use obscene language.
  • Debt collectors cannot publish your name in the newspaper or online but they can report you to a credit bureau.
  • Debt collectors cannot harass you with repeated phone calls.
  • Debt collectors cannot threaten to take legal action they do not intend to take. This includes garnishment and efforts to repossess collateral used for secured loans.

Debtors' Rights under Federal Law

Under the FDCPA, a person does have the right to stop debt collectors' contact efforts. To do this, a person must send the first collection letter they receive back to the debt collector through certified mail. A debt collector may keep trying to contact you as long as you do not respond to his communications.

After you do this, a debt collector can still sue you to collect the debt but they cannot contact you anymore. You can still contact the debt collector if you want to settle the debt. Debt collectors can contact you again if they send written notification of verification of the debt.

In the case of secured loans, this could include evidence that you have the collateral. Something to remember is that in most states, you will still owe debts on secured loans even if the collateral is no longer in your possession.

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