Debt Collectors and the Law

“Debt collectors” are collection agencies, attorneys, creditors collecting for someone else, and creditors collecting under another name as well as others. Creditors collecting for themselves are not “debt collectors.” Under the Federal Debt Collection Practices Act debt collectors may not...

Who are Debt Collectors?

Debt collectors are individuals or companies whose business involves pursuing payments on debts owed. They are hired by creditors to recover money owed on delinquent accounts. Debt collectors may pursue various types of debts, including credit card debt, medical bills, personal loans, utility bills, and more. Debt collectors can include collection agencies, attorneys, creditors collecting for someone else, creditors collecting under another name, and others.

Debt collectors use a variety of methods to pursue payment, including phone calls, letters, emails, and, in some cases, legal action. They may negotiate payment plans with debtors or offer settlements to resolve the debt for less than the full amount owed.

Both federal and state laws govern debt collection practices. These laws set guidelines for what debt collectors can and cannot do when attempting to collect debts, including restrictions on harassment, false statements, and unfair practices.

NOTE: Under the Fair Debt Collection Practices Act (FDCPA), creditors collecting for themselves are not “debt collectors.”

Definitions

Creditor: the person or company to whom you owe money. A creditor could be a bank, financial institution, lender, supplier, or any party that has provided goods or services on credit or has extended a loan to you.
Third-Party Debt Collectors: companies hired to collect debt on behalf of another entity, like a creditor.
- Unlike the original creditor, a third-party debt collector is a separate entity hired to pursue payment on delinquent accounts. These collectors operate independently from the creditor and are typically compensated by payment of a fee or a percentage of the amount they recover.
Debt Buyers: a company that purchases delinquent debts from creditors at a discounted price.
- Once the debt buyer purchases debts, they become the creditor and have the right to collect on the debts. Debt buyers may purchase debts in bulk, often for pennies on the dollar, with the intention of attempting to collect as much of the owed amount as possible. They may employ their own collection efforts or hire third-party debt collectors to pursue payment on their behalf.

Collection Agency Licensing Requirements

Maryland law requires collection agencies to obtain a license from the Department of Labor, Office of Financial Regulation. You can check a collection agency’s license status through NMLS, a multistate platform for licensing.

You should contact an attorney if you believe a business is operating as an unlicensed collection agency. Any judgements obtained by a business not licensed at the time of filing are void. There is no time limit for asserting that a judgment is void due to lack of a collection agency license.

Under the Federal Debt Collection Practices Act, debt collectors may not...

Contact You at Inconvenient Times or Places: Debt collectors cannot contact you before 8:00 a.m. or after 9:00 p.m. In general, they cannot contact you at a place or time that is inconvenient to you.

Contact You, Instead of Your Attorney: If the debt collector is aware that an attorney represents you, they must direct all communications regarding the debt to your attorney.
Contact You at Work: If the debt collector knows your employer does not allow you to receive communication at work, they cannot contact you there.

Harass or Abuse You: Debt collectors cannot engage in conduct that is intended to harass, oppress, or abuse you or anyone they contact about your debt. This includes making repeated phone calls to annoy you, using threats or intimidation, or using bad language when communicating with you. Debt collectors can also not publish your name or information related to your debt in an attempt to coerce you to pay.

Lie About the Debt or Consequences for Non-Payment: Debt collectors cannot make false statements or misrepresentations when attempting to collect debts. This includes falsely representing the amount owed, falsely claiming to be attorneys or government representatives, or providing false information about the consequences of non-payment. Debt collectors can also not threaten to take legal action that they do not intend to take.

Talk to Others About Your Debt: Debt collectors generally cannot disclose information about the debt to third parties, such as family members, friends, or employers, except to obtain your contact information. In communication with third parties, they cannot communicate that the purpose of the call is collect a debt.

Use Unfair Practices: Debt collectors are prohibited from using unfair means in their attempt to collect debts. This includes attempting to collect interest, fees, or charges that are not part of the debt. They also cannot demand that you pay using a postdated check.

Read the law: United State Code Title 15, Chapter 41. Subchapter V

Under Maryland's Consumer Debt Collection Act debt collectors may not...

Use or threaten force or violence.
Threaten criminal prosecution unless a violation of criminal law is involved.
Disclose, or threaten to disclose, information affecting your reputation for creditworthiness if they know the information is false.
Contact your employer about a debt before obtaining a final judgment.
Disclose or threaten to disclose to a person other than you and your spouse (or if you are a minor, your parent(s)), information affecting your reputation if they know that the person the debt collector is telling does not have a legitimate need for the information.
Communicate with you or anyone related to you at unusual hours, too often, or in a way that harasses, oppresses, or abuses.
Use bad language in communicating with you or anyone related to you.
Claim, attempt, or threaten to enforce a right knowing that the right does not exist.
Use a communication that resembles a legal or judicial process or gives the appearance of being authorized, issued, or approved by a government agency or lawyer.

Read the Law: Md Code, Commercial Law § 14-201 - 204

If a Collector Breaks the Act or the Law

Contact the Maryland Attorney General's Consumer Protection Division or call their hotline at (410) 528-8662.
Contact the Maryland Department of Labor, Licensing and Regulation (DLLR) Commissioner of Financial Regulation.
Contact the Consumer Financial Protection Bureau (CFPB) and/or the Federal Trade Commission (FTC).
File a lawsuit against the debt collector for violating the Maryland Debt Collection Act. The Act covers individuals and businesses collecting for themselves as well as debt collectors. Any collector who violates any provision of the Act is liable for damages proximately caused by the violation, including damages for emotional distress or mental anguish suffered with or without accompanying physical injury.
Sue under the Federal Act, which typically only covers debt collectors. You can do that in state or federal court. If you win, you could get actual damages plus up to $1,000 in extra damages. You can also get lawyer's fees.

Debt Buyers

Debt buyers are companies or individuals who buy debt from other creditors for a very low cost. Often, the original creditor or another debt buyer sold the debt because they were unable to collect. Debt buyers purchase the debt and then try to collect the debt themselves.

Debt Buyers must…

Abide by the same rules as debt collectors under the Federal Debt Collection Practices Act and Maryland Debt Collection Act mentioned above.
Provide proof of the debt. This should include a document signed by you when opening the credit card, or a statement showing you used the account.
Submit evidence that they own the debt, including a list of previous owners and any paperwork associated with the sale of the debt.
Describe how much debt you owe. This should include principal, interest, and late fees.

Frequently Asked Question about Debt Collection

What will happen if I can’t pay my debts? Can I be put in jail?

No. The court will not put you in jail for not paying a consumer debt owed on a credit card bill, medical bill, or rent payment. However, the court could issue a body attachment if you fail to appear when ordered. If you do not appear in court, and the court issues a body attachment, the police may arrest you.

If you can’t afford to pay a consumer debt, the law limits what a creditor can do to collect it. A creditor CAN take you to court and get a judgment against you. If a creditor has a judgment against you, it may be able to garnish your wages or your bank account. The court cannot garnish most federal benefits to pay debt.

NOTE: Failure to pay other types of debt, like restitution ordered after a criminal conviction, may result in jail time.

What will an unsecured creditor do if I don’t pay a debt?

If you don’t pay a debt, the creditor may call or write to ask you to pay the debt. The creditor may also send your debt to a collection agency, which may also call and write. Sometimes these calls or letters can be harassing. If you write a letter to the collection agency and ask them to stop contacting you, they must stop contacting you. However, it will not prevent them from suing you.

Sample “Do Not Call” letters

If a creditor offers me a payment agreement, do I have to set up a payment plan?

You do not have to set up a payment plan. If you can’t afford to make the payments, you should not agree to one.

If you can afford to pay the debt and agree to a payment plan, get the agreement in writing. Keep copies of checks or money order stubs that you use to pay off the debt. Keeping a record showing that you made payments on or paid off the debt is important.

How will not paying a debt affect my credit?

When you don’t pay a debt, most creditors report it to the national credit bureaus. This is how you get “bad credit.” If your credit is bad, you may have trouble renting an apartment, buying a car, getting insurance, or getting a loan. It may also make it harder for you to get a job.

Can the creditor take me to court if I don’t pay a debt?

Yes. A creditor may file a lawsuit against you if you don't pay. If you are sued, you should respond by the deadline to preserve your rights; otherwise, you could lose by default. If the creditor wins the lawsuit, they will get a judgment. A judgment is a final court order stating you owe the creditor money. If a creditor has a judgment against you, it may be able to garnish your wages or your bank account.

Can a creditor take my Social Security or government assistance?

Usually, no. The court can only garnish federal benefits in particular circumstances – to pay delinquent taxes, alimony, child support, or student loans. Outside of these circumstances, creditors cannot access government benefits. Examples of government benefits include Social Security, Supplemental Security Income (SSI), Veterans’ benefits, Unemployment benefits, Workers’ Compensation, and Temporary Cash Assistance. Creditors can also not access some other private disability income benefits and most pensions.

Can a creditor take the money in my bank account?

If a creditor has a judgment against you, it can ask the court for the money in your bank account. The bank may freeze your account and pay the money to the creditor. However, you can stop a creditor from taking your money if you have $6,000 or less in your account or if the money is from Social Security or other government or retirement benefits.

If your bank account is frozen, you will need to file a paper called a “motion” with the court to get to your money. You should contact a lawyer right away to get help. You should file your motion within 30 days to get the most protection.

Can a creditor take my wages?

If a creditor has a judgment against you, it can ask the court to order your employer to “garnish” your wages. When your wages are garnished, your employer pays part of your wages directly to the creditor. Your wages cannot be garnished if your disposable wages are less than 30 times the State minimum hourly wage per week.* In any event, no more than 25% of your disposable wages can be garnished. This means that you will receive at least 75% of your disposable wages. Your disposable wages are your wages after subtracting the required deductions for federal, state, and local taxes, Social Security, unemployment insurance, State employee retirement systems, and health insurance.

NOTE: This is not true for child support garnishments, which are not consumer debt.

*This means the court cannot garnish your wages if you make less than $ 450.00 per week.

Can a creditor take my personal property, like my furniture or clothes?

If a creditor has a judgment against you, it can ask the court to have the sheriff take or “levy” some of your personal property. Then, the creditor can ask that the sheriff sell this property, and pay the money from that sale to the creditor. It is very unusual for a creditor to try to sell your personal property, because it often costs more to sell the property than the property is worth. Creditors cannot sell any of your property unless the “fair market value” of all your property is more than $6,000. The “fair market value” is the money you could get for the property in its current condition if you sold it at an estate or yard sale. Fair market value is NOT what you paid for the property.

Source

Contributors: Erica Rankin, Esq., Amy Hennen, Esq., Derek Van De Walle, Esq., MVLS. Updated by Web Services Librarian.