Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

Collections agencies climbed to the No. 2 spot last year on the Attorney General’s list of consumer complaint categories. The industry has continued to slowly climb in the ranks since 2001, when it held 8th place. If the trend continues, collections will take over the top spot in 2008.

Collection agencies fall into two general categories – legit and deceptive. KIRO TV aired a troublesome report last week about sleazy businesses that try to bully you into paying a debt you don’t owe. Consumer Protection Division Chief Doug Walsh was interviewed for the story and said phony debt collection schemes are just another way cons are trying to separate you from your hard-earned cash. If you think you’re being scammed, notify law enforcement and our office.

If you truly owe the debt, you have legal rights. State and federal laws require that debt collectors treat you fairly, and limit how often they may contact you. You also have the right to write to a debt collector and tell them to stop contacting you. The law says they can't contact you again except to notify you of legal action or say they'll stop contacting you.

Time-barred debts, sometimes called "zombie debts", are those so old they are beyond the point at which a creditor or collection agency may sue you to collect. Legitimate collection agencies typically have six years to seek an outstanding payment; that’s when Washington’s statute of limitations to sue expires. If the consumer makes a payment within the six years, the clock starts ticking again. According to the Federal Trade Commission, most courts that have addressed the issue have ruled that the Fair Debt Collection Practices Act does not prohibit debt collectors from trying to collect time-barred debts — as long as they don't threaten to sue you. If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed.

The FTC says delinquent debts older than seven years usually can’t appear on your credit report. And, of course, a debt collector can’t try to collect a debt that has been discharged in bankruptcy. Still, Business Week published a lengthy article last November about debt collectors who reportedly have tried to collect on debts that were discharged by a judge.

Remember, the best way to avoid calls from collection agencies is to pay your bills on time. Outstanding debt can lower your credit score, which lenders use to determine if you’re a good risk for a car loan, mortgage or credit card. Last December, we blogged about a new FICO formula that will give a break to consumers who have one delinquent account if they’re in good standing with other creditors. For advice on selecting a credit repair program, read Attorney General Rob McKenna's column.

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