I've spent some time reviewing the questions (and posted answers) over on Yahoo's Answer section relating to questions about personal credit issues. It amazes me the number of misconceptions and outright falsehoods that people continue to spread about consumer debt issues. In no particular order:
Myth: Collection Agencies can do whatever they want and there is nothing I can do to stop them or prevent them from harassing me.
Fact: Collection Agencies and all 3rd Party Debt Collectors (including attorneys attempting to collect consumer debts) are governed by the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et seq. The FDCPA strictly regulates how a debt collector can interact with a consumer and what the debt collector can and cannot do. Violations of the FDCPA can result in the awarding of statutory damages plus attorney fees and costs. Wikipedia has a good overview of the FDCPA.
Also, many states, such as California and Pennsylvania, have consumer protection statutes the regulate how consumer debts can be collected. Sadly, New Jersey has no such statute.
Myth: Credit card companies and other creditors must comply with the FDCPA.
Fact: The FDCPA only governs 3rd party debt collectors, not original creditors. A credit card company attempting to collect its own debt is not covered by the FDCPA. But the minute the account is turned over to a collection agency or attorney, the FDCPA applies to those 3rd party debt collectors.
Myth: Credit card companies and other creditors can run roughshod over consumers.
Fact: While the FDCPA does not apply to original creditors, there are some states, such as California and Pennsylvania (via the Fair Credit Uniformity Extension Act, 73 P.S. §2270.1 et seq.) which have consumer protection laws that generally mirror the FDCPA but expand the scope so that they apply to original creditors attempting to collect their own debt. Sadly, New Jersey has no such statute.
Myth: A collection agency can garnish my wages if I don't pay them.
Fact: Some collection agencies like to threaten that they will garnish wages in order to get people to pay them. Such threats are prohibited under the FDCPA. Also, not all states permit wage garnishments. Pennsylvania is one of them. And, even if you live in a state that permits wage garnishment, it is only permitted if the plaintiff wins the lawsuit and there is a court-ordered judgment entered against the defendant.
Myth: I don't have any money / assets, so I have nothing to worry about if a collection agency contacts me / I am sued for unpaid bills.
Fact: This belief is based on a person's belief that they are "judgment proof", i.e. that since they have no assets / money, that there would be no money for a plaintiff to go after if they win a lawsuit. However, one must consider the effect of having an account placed in default on their credit report, which can reduce the ability of the person to obtain credit in the future. Also, the person might not be as "judgment proof" as they think, as a determined plaintiff who prevails in their lawsuit has many tools at their disposal to discover assets of the defendant in order to execute upon.
Myth: I can be sued at any time for a past-due account, even one that is many years old.
Fact: Each state has laws (called the Statute of Limitations) governing the maximum time that a person can file a law suit concerning a matter. After this time has passed, a law suit can not be filed. In New Jersey, the SOL for written contracts (such as credit card debt) is 6 years. In Pennsylvania, the SOL for written contracts is 4 years. The SOL begins to run when the debt became due (i.e. the contract was breached or account went into default) or the last payment was made. Be aware that the SOL can be re-set if a payment is made or the debt is re-validated (i.e., the debtor reaffirms the debt).
Myth: I can be arrested and send to jail if I do not pay my debts.
Fact: Debtor prisons haven't been legal in the US for over 150 years. You can not be arrested or sent to jail for not paying your debts. The only way you can be sent to jail in a civil matter is if you ignore a court order, are held in contempt of court and the court orders your arrest until you comply with the court's order.
As always, it is best to seek the advice of an attorney who is licensed in your state and familiar with consumer collection (also called consumer litigation) issues. You can usually get an attorney referral from your local county bar association and you might be eligible for free legal assistance from your local county Legal Aid office.
