4. Collections: Protections and Responsibilities
It is not only seniors with limited incomes
who fall behind on their bills. Older
consumers of all income levels can find
themselves in a financial strain. Already
vulnerable because of limited incomes,
diminishing savings and unpredictable
health care costs, the older consumer
is also a favorite target for a constant
barrage of slick ads and skillful solicitations
that encourage thoughtless use of credit.
Like any business, a credit card company
is entitled to a reasonable profit. It
must try to collect what its customers
owe. But aggressive lobbying by credit
card companies has been a big factor in
legislation expanding marketing practices,
minimizing consumer protections and tightening
bankruptcy laws. The seduction of easy
credit combined with hard collection efforts
is causing problems for many seniors.
What to pay first.
The consumer facing a financial
crisis must choose which bills to pay
first, and the sooner the better. Ignoring
a problem does not make it vanish. Here
are suggested priorities for senior consumers:
Bills that keep a roof over your head,
utilities turned on, food on the table,
clothes on your back.
Car loan and liability insurance, if having
a car is critical for you.
Vital health insurance. (The local Area
on Agency insurance counselor can provide
free assistance in deciding what coverage
Secured debts other than those on home
and auto; a loan secured only by household
goods may be less critical than other
Avoid consolidating debts and paying
them off with a secured loan, especially
on your home. In most cases this just
adds to the debt load, it does not reduce
it. When consolidation involves pledging
a house, car or other asset, that turns
unsecured loans into secured loans. Non-payment
of a credit card debt might never cause
a major problem, but once it becomes part
of a secured debt, non-payment could cause
loss of your home or other collateral.
You have a contract with the credit card
company and you owe it notice of the situation.
Call any creditors you will not pay in
full and follow up in writing. Explain
that you are in a financial bind but want
to pay this debt, and you will try to
resume full payments as soon as possible.
Give the reason if there is a good one.
If you can pay something ask the creditor
to work with you by reducing interest
and removing penalties and fees.
Some creditors will work with you, but
many take what seems like a counter-productive
approach, refusing to make adjustments
as long as payments are current. Do not
agree to any plan that does not reduce
the debt. In any event, stick with your
priorities: shelter, utilities, food,
clothes, auto, health insurance, secured
There are rules about
what collectors can do and say.
The Fair Debt Collection Practices Act
regulates the actions of collection agencies.
Creditors trying to collect their own
debts are not covered. By all means contact
the creditor before it contacts you about
a past due account, but if you cannot
work something out with a creditor it
may turn your account over to a collector
anyway. This is not always a bad thing.
Sometimes collection agencies will make
arrangements a creditor would not, and
they are subject to stricter rules about
Dont be pressured
into paying non-priority bills first.
Collection agents can be very aggressive.
Thats their job. Your job is to
protect yourself and your family. Do not
make your payment decisions according
to who is pushing the hardest. The less
real clout the collector has the more
aggressive (s)he is likely to be. (Mortgage
and auto finance companies don't have
to threaten, they can take the collateral.)
Do not be moved by threats to report you
to the credit bureau. The delinquency
may already have been reported or probably
will be, and in any event a negative credit
report is less important than shelter
rudeness. You are not a terrible
person, you have just fallen behind on
bills. You did enter into a contract and
you do owe a reasonable explanation if
you cant pay a just debt as agreed,
but you do not need to justify yourself
to or tolerate abuse from a collection
agent. Explain briefly that you cannot
pay now but will pay when you can. Some
collectors are experts at fast talk and
mean jabs. Dont be hooked. If a
collector pressures you, say politely
that you have responded and now you are
going to hang up - then do.
Rules for collectors.
Collection agents may not legally call
before 8:00 a.m. or after 9:00 p.m. or
make constant, repetitive calls. There
should be no intimidation, no empty threats
of legal action (see next paragraph) and
no obscene or profane language. If you
have an attorney and provide his/her name
and number, that should end the call and
you should not be contacted again. Promptly
make notes of names, dates and times and
what occurred during a call. It is surprising
how fast memories fade (and how quickly
what we remember becomes what we wish
we had said). If any collector uses prohibited
tactics, mention that (s)he is breaking
the FDCPA rules. You can report violations
to the Federal Trade Commission, Bureau
of Consumer Protection, Washington, D.C.
Do not be unreasonably alarmed by threats
to take your property. No
one can garnish wages or bank accounts
or seize your home or personal property
without first getting a judgment against
you (filing and winning a lawsuit against
you). If a collector threatens seizure
ask if (s)he is claiming that the company
has a judgment against you. You must receive
legal papers when someone sues you. Such
papers are more than letters though they
may arrive by certified mail. They clearly
identify the court in which the action
is filed and state a time for you to respond.
Collectors threats to seize assets
are often just hot air; if so they are
prohibited by the FDCPA.
Risk of suit.
On the other hand, if an account is past
due there is always the possibility of
a lawsuit to collect it. The degree of
risk varies. A few creditors sue on most
debts. Many rarely sue unless the debt
is very large, some not even then. Lawsuits
and after-judgment collection procedures
involve hassle and expense for the collector
and the likely return often does not justify
the costs. Do not ignore the risk but
do not panic; hold on to your priorities.
Even when there has been a lawsuit and
a judgment has been entered, part of the
value of your homestead and some personal
property are exempt from collection efforts.
Public benefits and entitlements like
Social Security and SSI are not subject
to garnishment even after a judgment is
entered. If you have significant equity
in a home or other assets that are not
within the state exemption amounts, a
judgment creditor may be able to reach
those assets. You would have advance notice
of any such efforts, however, and it is
very unlikely that they would include
calls from a collection agency.
If you are being harassed, you can write
a cease letter. Reference
your account number and state that, as
provided by the FDCPA, you are writing
to request that the collector stop communicating
with you about it, and that you will take
care of this matter when you can. Mention
any abusive tactics that you have experienced
and note any billing errors. A cease letter
does not necessarily stop collection efforts;
it only stops contacts with you.
If you do receive papers showing a suit
has been filed against you, act immediately.
Do not ignore them. Never allow a creditor
to get a default judgment (one entered
just because you did not respond). Once
you are served you may have only a few
days to file an answer with the court.
Get legal advice. A lawyer will look for
any legal defense you may have, but even
if there is none, (s)he may be able to
help you settle with the creditor. Also,
creditors file suits assuming debtors
will do nothing, because thats what
usually happens. When a debtor retains
an attorney the creditor sometimes backs