United States Laws of Debt

Persons who take out secured loans need to be aware of the laws governing debt collection in the United States. Debt collection efforts in the US fall under a wide variety of state and federal laws.

Debt collection efforts that violate the law are not valid. Individuals with secured loans should be aware of what legal powers debt collectors have.

Legal Powers Debt Collectors Have in the United States

The legal powers that debt collectors have to collect debt from secured loans in the US are actually quite limited. Generally, a debt collector can take four courses of action to collect a debt.

United States Laws of Debt

The actions that legally can be taken to collect debts in the United States include:

    1. The collector can contact the debtor and inform them of the debt as long as she follows the guidelines set by a federal law called the Fair Debt Collection Practices Act.

    2. The collector can sue the debtor and if they win a judgment, garnish the debtor's income. Any income including salary, business income, investment income and government benefits, such as Social Security, can be garnished.

    3. The collector can report the debtor to the Big Three credit bureaus. This can lower the debtor's credit rating and make it harder to get loans, rent housing or apply for jobs.

    4. In cases of secured loans, the collector can try to repossess or seize the property used as collateral.

Enforcement of Laws of Debt

There is currently no federal agency charged with enforcing the laws of debt or regulating secured loans. Instead, most consumers will have to hire attorneys to protect their own rights.

The federal government has set up a Consumer Finance Protection Bureau, which might yet be charged with enforcing laws related to consumer secured loans. The scope and powers of this agency have not been established yet, so it has not been determined if the CFPB will enforce laws on debt collection.

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