How to Research Debt Collectors & Understand the Law

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DebtThis is the first guest post in a special How to Fight Debt Collectors series on

So you’ve received a debt collection call or letter…

In this day and age where you have rampant foreclosures, layoffs and job losses, it is simply inevitable that an individual may come across a debt collector, and frankly even without these external factors, it may just happen by a chance wrong number or even being related to someone going through a hard time financially. Many people have questions and are unprepared to deal with this, but after reading this series of articles, you will be. I will detail the key steps you should take to secure your rights, aggressively defend yourself, and ultimately make the debt collectors pay YOU to go away. This is not your typical “just pay your bills and get a second job” column, so please read on.

The War for Your Money

There is a battle out there folks, and like it or not, you have been drafted. This is the war for your money. Banks, credit card companies, credit bureaus, and debt collectors are all in it together on one side, and on the other is you and me, the American consumer on the other. I wish I could describe it as a fair and free negotiation for goods or services, but it simply is not. Consumers need to understand that there are smart, well heeled interests seeking to exploit them and take advantage of them every chance they get.

Don’t believe me; just look at what these parties have done over the years: Two cycle billing, mandatory binding arbitration, the latest bankruptcy reform, below market mortgage deals for legislators, and the list goes on and on. These are all coordinated efforts to take away your rights and to turn you into a financial slave.

Consumers need to adopt an aggressive, litigious mindset and understand that Angelo Mozillo (former CEO of Countrywide) is not your friend. In fact, if you are trying to do a loan modification, he thinks you are disgusting. When these morons have a problem and make a bad decision, it is a national emergency requiring lots of our money, but woe to thee if one of us mere mortals has a financial problem or makes a mistake. They’ll have no mercy on us and respond with bad credit reporting, inflated demands for money, baseless lawsuits, etc… Well, I say enough is enough.

More to the point, debt collectors routinely violate the law in various ways, at which point the collectors most likely owe the consumers money. Consumer up to now have not made at the collectors pay. This is how the primary law, the Fair Debt Collection Practices Act was designed to work by congress: private attorney generals (that’s’ you) suing debt collectors into compliance. The basic strategy is to document violations of the law, file suit, and usually the smart collectors will hand you some money and beg you to leave them alone. Once a collector violates the law that is your opportunity to make them pay, literally.

The terminal purpose should be you facing your creditors in a court of law with their name under the Defendant column. Notice, I didn’t say draft Intent to sue letter, threaten to file suit, get an attorney to write a letter, or any of that crap. File a lawsuit. It isn’t hard, it isn’t scary, and it isn’t prohibitively expensive. I will show you the way, lock and load and follow me!

Know Your Enemy & The Battlefield

The very first thing I would do is punch their name into Google and check out Google will give you some idea of the agency’s tactics and reputation, and Bud Hibbs will give you more detailed information from a consumer viewpoint. Budd has a good database of the major players in the debt collection industry and their tendencies, so you can know what to expect going forward.

  • Does the collection agency have a tendency to violate the law?
  • Are they complete fraudsters?
  • Are they operating under a consent agreement from the FTC?

These are key questions you can get an early indication of by doing some basic research. Additionally, check some of the consumer message boards:,, and are all good places to start. It’s not uncommon to find someone currently dealing with or someone that has dealt with that company in the past. Start a thread and enlist your fellow consumers for help, they are more than likely willing because we’re all in this war together.

Second, find out the company to see if they are bonded or licensed as required by state law. You need to understand the requirements your state imposes on debt collectors. I have found that this LawDog center resource page is one of the best places out there to learn the requirements debt collectors have to satisfy. Some states require only a license, some require only bonding, and others require both. I list the requirements for each and every state in this article, but do yourself a favor and at least become familiar with what your state requires. This is important because if they aren’t compliant, each of their collection attempts is illegal and you can drag their butts into court.

Finally, and this should go without saying, but you need to be very familiar with the debt collection laws in your state and the Federal laws that cover this. Do you know what the maximum penalty for debt collector violations under state law is in North Carolina? (It’s $2,500 per violation) Can a debt collector call your relatives (yes if they do not have your location information, otherwise no) Is that a violation for a debt collector to call at 7:30 AM? (yes) Say you received an initial call from a collector, is there anything else they have to do? (yes, send you a summary of your rights under the FDCPA within 5 days). I wouldn’t expect everyone to be able to spout off the laws on command, but certainly know what laws apply and where to find them.

Next, we’ll take a look at your first line of defense – the debt collection dispute letter.

(Photo: jaytamboli)

{ 9 comments, please add your thoughts now! }

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9 Responses to “How to Research Debt Collectors & Understand the Law”

  1. My Journey says:


    Amazing Start to a very detailed area of personal finance and the law. The only thing I would add is to watch out for attorneys who use their degree to start a debt collection office.

    Just because someone has ESQ after their name does not mean they are more ethical than those collection agencies (even though they are supposed to be!)

  2. Jim says:

    A lot of people see “lawyer” (or esquire) and get spooked, but you’re right. Passing the bar doesn’t mean you’re more (or less) ethical. 🙂

  3. zapeta says:

    I can see this is going to be a great reference, can’t wait to see the rest!

  4. Andrew says:

    I worked for a law firm that rented space to another (smaller) law firm, two lawyers and a handful of clerks. The smaller firm’s entire business was debt collection. They would send a target a “survey” to fill out along with a small (say, $10) check for their efforts. When they would deposit the check, the law firm would get the bank account number off the back of the check and levy against that account. I find it hard to believe they got away with it for so long, but AFAIK they’re still operating nearly 20 years later. No idea whether they’re still using this method, though.

  5. with zapeta.

    This should be very worthwhile reading.

  6. Another thing to remember about attorney-collectors: they are doing this on a volume-based model most of the time. Translation? They will encourage their clients to settle as fast as possible. Settlement means less work for the money. Attorneys are usually paid on a percentage of the money collected. If they can get you to voluntarily send in money, they will settle an account for less since they won’t have to spend time and money to use the legal process.

    A bird in the hand is better than two in the bush..

  7. Sam says:

    Can you demand a debt collector to provide you proof that they have bought your debt from another agency? Otherwise, how would you know that it’s not someone who is following collections who want to funnel some money?

  8. Credit Lawyer says:

    @Andrew – thanks for sharing the story about the fake surveys. Consumers tell me about spoofed telephone numbers including a recent call from “Emergency Services” about her pre-school age child and a variety of telemarketers (etc.) when, in fact, the callers are debt collectors.

  9. ian says:

    Small typo.This is how the primary law, the Fair Debt Collection Practices Act was designed to work by congress: private attorney generals”

    The correct plural is attorneys general.

    Great article, great series!

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