If you’re dealing with collectors, there’s been a game-changing Supreme Court ruling that you need to know about. This is BIG.
I’ll break it down so you don’t have to sift through legal-ese. Short and sweet, I promise.
The Fair Debt Collection Practices Act (FDCPA) gives consumers specific legal protection from harassment and abuse from debt collectors. If you have collectors calling you, it’s important to know your rights and take a proactive stance. But more on that in another post.
When you owe a company like Mastercard and don’t pay for awhile, it goes into default, and then gets sent to collections. Sometimes Mastercard (or whatever company you owe) will hire a third-party company to collect the debt on Mastercard’s behalf.
Another thing that can happen is Mastercard can SELL your debt (weird, huh) to another company. All these companies do is buy old debts for a reduced price in hopes that they’ll be able to collect more than the amount they purchased (there’s a little more to it but that’s the gist of it).
So if you owed Mastercard $10,000 and defaulted, Mastercard might sell the debt to another company for $7,000. Mastercard is happy because they’ve at least recovered $7,000 and don’t have to spend any more effort to collect the remaining $3,000.
The debt purchaser is happy because they think they can collect the $10,000, or at least more than the $7,000 they bought it for, and still make a profit. (See why they get nasty? They HAVE to collect on old debts to stay in business.)
So we’ve got two different kinds of debt collectors from a legal standpoint: the third-party that’s collecting FOR another company and companies that OWN the debt, whether they are the original owners or purchasers.
You follow me? This is a key distinction in the Supreme Court ruling.
The Supreme Court decided the other day that FDCPA plainly applies ONLY to third-party debt collectors who are collecting debt FOR someone else.
This means if your old debt gets sold to another company, FDCPA does not apply to them, which gives you less legal protection against scummy tactics to collect debt.
In fairness to the Court, this was an easy one for them: the decision was unanimous. If you’ve followed SCOTUS at all in the last few years, it’s amazing that they can unanimously agree on ANYTHING anymore. But I digress…
The Court’s opinion explains that the law’s language made it very clear that Congress only intended the law to apply to third-parties who are collecting on behalf of another company.
In other words, says the Court, blame Congress if you don’t think the law goes far enough to protect the consumer. The law itself is Constitutional, so it’s not our job to rewrite it to your liking.
But take heart, my friends, because this does NOT mean you have zero rights if you’re facing debt collection. Harassment and slander laws still apply to these companies (I’m not a lawyer so don’t consider this legal advice, it just follows that no one is exempt from existing laws), and my tips for dealing with collectors remain the same.
If you’re dealing with debt collectors, it can be incredibly overwhelming and scary, and the fear can hold you back from dealing with it head-on. The good news is that there IS a way to get through it. The first step is to know your rights. I’ll keep you updated.