Last updated July 28, 2017.
Before 1977, debt collection was a frightening prospect. Collectors would call at all hours of the day and night and threaten to sue you, to have you jailed, and some would even threaten to cause you physical harm. In 1977, Congress enacted a law to protect debtors from these abusive debt collection tactics. The Fair Debt Collection Practices Act (FDCPA) seeks to ensure the use of reasonable collection practices for consumer debt and gives debtors the means to protect themselves.
FDCPA 15 U.S.C.A. § 1692 Overview
The FDCPA aims to “eliminate abusive debt collection practices by debt collectors.” 15 U.S.C.A. § 1692(e). To this end, it regulates communication between collectors and debtors, harassment and abuse by collectors, use of false or misleading representations, and unfair debt collection practices. § 1692. Under the FDCPA, collectors may only call at reasonable hours and may not call repeatedly in an attempt to harass the debtor. § 1692c. Debt collectors must honor a consumer request that the collector stop calling altogether. § 1692c(c). Debt collectors may not threaten physical violence, use obscene language in communication with the consumer, or publish a list of debtors in an attempt to shame them into payment. § 1692d. Debt collectors must identify themselves as such and inform the debtor of the amount and origin of the debt. § 1692d.
In addition to these rules, a debt collector may not make any false representations to the consumer. § 1692e. That includes falsifying the amount or character of the debt and threatening legal action that the collector cannot or will not actually take. Id. The FDCPA also forbids collectors from filing lawsuits they don’t have the legal standing to file — such as filing for collection of a debt that hasn’t actually been assigned to them. Id. Regardless of legal action taken in relation to the debt, collectors may collect only the amount in the original debt agreement — they can’t tack on additional fees or costs unless the debt agreement specifically allows for it.
See also: Help! Creditors Are Calling My Mom!
FDCPA Violations: My Rights Against Debt Collectors
While you probably won’t be faced with death threats from debt collectors, they may still be abusing you in violation of the FDCPA. For example, in 2000, the D.B.S. Collection Agency filed suit against the Foster family for collection of certain consumer debts. The court ruled in favor of the collector and allowed D.B.S. to garnish the Fosters’ wages. D.B.S. went straight to the Fosters’ bank and started to garnish the Fosters’ wages without ever notifying them. They first learned their wages were being garnished when their checks started to bounce. They contacted their attorney to sue D.B.S. for violation of the FDCPA. Foster v. D.B.S. Collection Agency, 463 F. Supp.2d 783 (S.D. Ohio 2006).
The FDCPA prohibits misrepresenting the “character, amount, or legal status of any debt,” implying that nonpayment will result in garnishment when it legally cannot, and taking or threatening to take any action that the collector can’t actually legally take. § 1692e. The Fosters started a class action lawsuit for several alleged violations of the FDCPA, including attempting to claim attorney’s fees for the lawsuit, filing debt collection suits against people without actually verifying that those individuals owed a debt, and filing collection suits for debt that was not actually assigned to it. Foster, 463 F. Supp.2d at 800.
So, what legal action can debt collectors take?
Here are a few main points from this case study:
- D.B.S. regularly sued consumers for both the amount of the debt and attorney’s fees for the lawsuit. In Ohio, creditors cannot recover attorney fees for lawsuits involving personal, family, or household debt. Id. at 802. Claiming attorney fees in a lawsuit leads consumers to believe that they will actually have to pay those fees, even though Ohio law prohibits it.
- D.B.S. also regularly sued both spouses without any procedure to verify who owed what debt. Legally, a collection agency has to make a reasonable effort to determine whether you owe a debt before they sue you for collection. If you’re married but only one spouse has debt, the other spouse isn’t necessarily liable for it. D.B.S. didn’t have the right to sue one Foster for the other’s debts.
- Finally, D.B.S. was suing for debts the creditors had never assigned to it. When you default on an account, the original creditor may either assign the debt to a collection agency or sell it to a debt buyer. When a creditor assigns debt, it gives the collection agency the legal right to collect on the debt but the original creditor still owns the debt. The original creditor pays the collection agency a fee to collect the debt. Creditors would pay D.B.S. to collect their overdue debts, but never assigned the debts to the collection agency. Under Ohio law, you may not sue for a debt that has never been assigned to you.
D.B.S. was using multiple illegal debt collection practices. The Fosters knew they had been treated badly and they took action against D.B.S. to protect themselves and other consumers.
If debt collectors are calling, keep a record of your contact with them. If you believe that they have misled or mistreated you, speak to an experienced attorney about defending your rights under the FDCPA.
Ohio Debt Collection Laws: Protections from Debt Collectors
In addition to the protection the FDCPA provides against abusive practices, Ohio state law protects some of your assets from collection. If a debt collector wins a judgment against you, it can generally collect (with a court order) by garnishing your wages or bank accounts, seizing your property, or putting a lien on your home. However, they can’t take everything.
Debt collectors must leave 75% in pay each week alone. Unless your debt is to a federal agency, they also can’t take any government payments, such as Social Security, disability, or any state-administered benefits. They have to leave $3,775 in equity in your car. That means that if your car is worth $10,000 and you owe $7,000 on it, your equity is only $3,000 and debt collectors can’t seize the vehicle.
Using the same principles, Ohio law protects up to $136,925 of equity in your home. If you have more than $3,775 of equity in your car or $136,925 in your home, a debt collector may seize and sell the asset but must pay you the $3,775 or $136,925 after the sale. Ohio law also protects up to $12,625 in household goods including furniture, clothing, and musical instruments. The law protects jewelry valued up to $1,600. Finally, debt collectors must leave $475 in your bank account. (Please note, these exemption amounts change regularly, so consult with an attorney for updated numbers.) R.C. § 2329.66
Federal and Ohio state law offer you some protection from the practices of debt collectors and from collection itself, but there is another way: filing for bankruptcy.
Bankruptcy Stops Creditors from Harassing You
It all happens thanks to a concept known as the automatic stay. What is the automatic stay? Bankruptcy is meant to give you a fresh financial start without turning you out onto the street. The automatic stay is one of bankruptcy’s most powerful tools for sheltering you from creditors while you reorganize your finances. It stops creditors and collection actions in their tracks. While your case is pending, creditors cannot contact you, or try to collect in any way. If they do, the court will often fine them, in the form of a sanction.
The automatic stay stops creditors and others from moving against the debtor during the bankruptcy process. It covers every type of claim for collection, enforcement of a judgment against the debtor, repossession, and foreclosure. 11 U.S.C. § 362(a). Creditors may not take any new action against the debtor and any actions in process must stop for the duration of the bankruptcy. The idea is to freeze the debtor’s finances so they may be reorganized as fairly as possible according to the rules of bankruptcy.
In practical terms, debt collectors have to stop calling you and sending you collection notices. Any lawsuit to collect on overdue debts must stop and if you’ve already lost a collection suit but haven’t paid yet, your creditor can’t force you to pay while the stay is in effect. Collection on taxes and student loans must stop. Creditors must stop garnishing your wages or using any other method of forced collection. Creditors have to stop any foreclosure process and can’t repossess your property. If they have already repossessed property but have not yet disposed of it, they have to return it to you.
How long do I have before creditors start calling again?
The automatic stay is, of course, temporary. Assuming no creditors file motions for relief from the stay (which can happen), it will remain in effect for the duration of your bankruptcy. If you file under Chapter 7, that may be as little as three months. At that point, creditors may again pursue you for any secured debts that weren’t settled during the bankruptcy. If you file under Chapter 13, the stay lasts for the duration of the plan, which is usually five years.
Creditors may ask the court for relief from the stay for certain reasons. If you file under Chapter 7, creditors may seek relief from the stay for debts that wouldn’t be discharged anyway, like child support or spousal support. Under Chapter 13, creditors may ask for relief from the stay if you miss a payment on a secured debt or if the collateral is uninsured and could be damaged.
What if a creditor violates the automatic stay?
A creditor might violate the stay inadvertently. “Violating the stay” may mean repossessing your property, continuing a foreclosure, or doing anything else the automatic stay prohibits.
Perhaps the creditor acted before it received notice of your bankruptcy filing or perhaps it made an honest error. If that happens, the creditor will have to correct its error promptly. A creditor might also violate the stay intentionally or refuse to correct its honest mistake within a reasonable amount of time. If that’s the case, the court may penalize the creditor.
Generally, you just have to file for bankruptcy to enjoy the protections of the automatic stay. However, certain circumstances may limit the stay or make you ineligible for it altogether. The biggest exception is for repeat filers. Say you file for bankruptcy, have your case dismissed, and then file again within a year. In that case, the automatic stay will only be effective for 30 days from the date you file the second time.
If you’ve filed two or more cases and had them dismissed within the past year, the automatic stay will not apply at all.
Speak to an Ohio Bankruptcy Attorney
Bankruptcy is a complex process and the automatic stay is a crucial ingredient. Speak to an experienced attorney about how the automatic stay will apply to your case, whether you’ll fall under any important exceptions, and how the automatic stay and the bankruptcy process can benefit you.