Debt collectors rights

Helene Mueller
eCollect support team

The actions taken by debt collectors in order to collect outstanding amounts are not random. There are rules which define the scope of procedures and a code of conduct to ensure the measures taken are legal and ethical. Debt collectors’ rights are inextricably bound up with fair debt collection and have to be carried out in compliance with various state and international laws and acts. These regulations determine whether a DCA’s (Debt Collection Agency’s) actions are ethically appropriate and legitimate; or are violating and in breach of consumer’s rights. Depending on whether the collection agency carries out consumer or commercial debt collection, there are different acts that control debt agents’ rights. In the U.S. the prime regulator is the Fair Debt Collection Practices Act. However, it applies only to third-party DCAs and only for consumer debts. If the collection process is related to corporate debts or first-party debt collection, there are other acts applicable.

Debt collectors rights & obligations

Debt collection agents have standardised rights and obligations, which are generally the same on an international level as well but can slightly vary between countries. If a creditor is acting on his own behalf, collecting defaults he owns, he is authorised by law to charge the debtor a late payment rate of interest. He is also allowed to perform full debt collection process by using his internal department, hiring a debt collection agency, or selling his default accounts to debt purchasers. If the lender transfers the debt case to a DCA, which will act on his behalf or buy his defaults, the collection agency is allowed to perform only permissible and legal debt collectors practices, including sequence of written reminders in the form of letters and emails; oral communication with the debtor; usage of professional law agents (debt solicitors and attorneys).

A standard debt collector has no right to confiscate debtor’s personal items, but the agency is accredited to involve debt lawyers to perform such actions. A standard agent can visit the subject of debt at his property and recommend different payment plans. A debt attorney can also operate using in-house visits and can also negotiate with the debtor, but a debt solicitor also has the right to legally perform repossession or seizure of debtor’s belongings/property. Such attorneys can also request bankruptcy or wage garnishment order from court, although this is rarely used, as DCAs prefer to negotiate with the consumer first, rather than carry out costly legal and lawsuit actions.

Along with debt collectors rights, debt agents also have certain obligations to conform with. They are obliged to provide only true and accurate information on the subject of debt; to inform him in writing about debtor’s default payment problem, describe possible options for repayment, etc. If requested by the indebted consumer, a debt collector has to present legal and written proof of the past-due monetary obligation. In the U.S. this is the so-called Truth In Lending Act (see
), which binds each debt collector to place debt information to debtor’s disposal. According to this act, such information must include the date of debt (when the monetary sum has turned into default), the full name of creditor’s and DCA’s company, the total amount of any additional rates and charges and overall cost to the debtor.

Debt collectors right of entry & repossession

In certain situations, debt collectors rights include entering debtor’s property in order to carry out inspection or seizure (repossession) of personal belongings. Debt collection lawyers, court bailiffs or high court enforcement agents can forcefully enter a property, if they provide a Court Order document on the subject of debt. Debt collectors will rarely force their way into an estate, but prefer to negotiate with the debtor first. Debt collectors can also use the so-called “peaceful gaining entry” (valid for the UK), where the agent can enter a property through an unlocked door or window and this is not considered as trespassing or a breach of law.

If debt settlement is not a possible option, agents will usually first request a warrant of execution or a writ of fi. fa. from court, rather than a warrant for entry. The last two terms are applicable for UK and Wales (see ext. link 7 & 8). The warrant of execution gives the debt agents the explicit right to repossess or seize debtor’s personal goods and possessions. These items will be sold at auction and in this way, the debt will be settled in full. This method, however, is also avoided by debt agents, unless there is no other option. Debt collectors generally prefer performing negotiation with the debtor. If the debtor agrees to the new conditions, the agent can take some of the consumer’s possessions (with written agreement from the subject of debt) and again sell them at auction to clear the debt. Or the DCA representative can offer another sort of debt settlement or a debt management plan.

Used literature & external links