Don't Pay a Debt That is Not Yours

 

When a financial crisis occurs many people often become victims of scams and get taken advantage of because they don't know their rights and allow fear to cause them to make bad decisions.  Companies take advantage of many consumers by using guilt and fear. Do not take responsibility for a debt you do not owe because once you do; you are bound to that debt and will have to pay it.  Then the company has the right to report the account on your credit reports.

Many companies are desperate for business and are looking for someone, anyone to pay back an old debt. Companies are now reaching out to relatives and friends of the deceased to try to recoup money for delinquent debts.  Many companies also buy mailing lists, email lists and telephone lists to find victims.

Based on the Fair Debt Practices Collection Act (FDPCA) by law you are not required to pay a debt that does not belong to you unless your name is on the account as a joint account holder. A creditor can only contact you for payment for a debt of a deceased spouse or parent who had an estate or any assets worth value, i.e. an inheritance, a banking account, boat, car, home, stocks, bonds, or other assets.  The money owed to the creditor is paid by the estate after any money owed to the government is paid first. Here are seven ways to avoid paying someone else’s debt.

1. Obtain the caller's name, title, name of the company they are calling from and what they said, their direct phone number, email address and mailing address. 
2. Tell the caller you will contact your attorney and then contact them if it is determined that money is owed to them. 
3. If you have any bank accounts or other accounts that are in the name of your deceased, spouse or parent's name put them in your name to prevent creditors from garnishing those accounts.
4. If you feel you are being harassed tell the company to stop contacting you by phone and notify you in writing. 
5. Dispute the account on your credit reports at annualcreditreport.com.
6. File a complaint with the Better Business Bureau at bbb.org.
7. Learn about your rights as a consumer at ftc.gov and file a complaint against the company.

Why Most Americans Are in Debt

                                                           

According to a 2014 report by Newsday 1 in 3 Americans have a debt in collection. These numbers are not quite accurate since it does not include mortgage debt. According to Realtytrac, 9.1 million residential homes were underwater in the second quarter of 2014. In addition, the report only reviews data from credit reports. Not all companies report outstanding debt on a consumer’s credit report which includes some medical debt and riskier financial products such as payday loans. According to Experian, 64 million American have no credit file or a thin credit file.  Those with no credit file may owe debt which is not factored into the report data. 

Why Americans are in debt

• Healthcare costs have increased 113% since 1999 and continue to climb. Premiums are expected to climb another 166% by 2019.
• According to the Annual Survey of Senior Costs, since 2000, the Social Security Cost of Living Adjustment (COLA) has increased benefits 41% while senior expenses have increased 84%. According to SSA.gov, in 2009 and 2010 there was no COLA.  In 2011 it was 3.6, in 2012, 1.7 and in 2013, 1.5.
• According to Forbes.com, college tuition prices increased at a rate higher than inflation for the past 30 years.
• It is getting even harder to make ends meet. In 2014, living costs continue to increase for housing, rent, airfare, clothing, tobacco, food, gas and utilities according to usinflationcalculator.com.
• Americans incurred at lot of debt during and after the recession and still owe on those debts.
• Some consumers may not be aware that they have debt in collections. Some consumers only become aware when they apply for credit or get a copy of their credit report.
• According to a 2009 Federal Trade Commission report, debt collectors search methods have improved for finding people who owe money.
• Couples with children or single parents have greater expenses and more debt than those who don’t have children.
• In 2011, credit card companies loosened their rules for approval which allowed more people to borrow money and get in debt.
• In many instances consumers receive a medical bill for service even if the consumer is not responsible for the bill. As a result consumers are forced to pay the account. Medical debt is an unforeseen expense as consumers do not know when they will become ill, if their insurance will cover a specific charge or how much they will be responsible for until a bill arrives in the mail or until a collection account appears on their credit report.
• Debt is incurred by parents helping their children or family members who experienced a financial crisis.
• The sandwich generation who are helping their children and parents financially are getting further in debt.

What Can Americans Do To Fix It

• Review. Get a copy of your credit report at least once a year.
• Verify. Ask for a debt verification to verify you owe the debt. The company should send an original bill or an itemized list of charges you owe on company letterhead.
• Plan. Setup a payment plan you can afford to pay the debt. Ask the company to confirm the agreement in writing and update your credit report once the account is paid in full.
• Seek professional help. If you are able to negotiate or manage your debt on your own contact a credit counseling agency, credit counselor, financial coach, or financial planner for assistance.
• Downsize or downgrade. Downsize or downgrade your lifestyle. Reduce spending by 30-50%.  Move to a less expensive area or trade in your car for a cheaper one to save money. Downgrading your lifestyle requires making small changes like taking your lunch to work or reducing your cell phone plan.
• Income. Earn extra income to pay down debt.
• Live like a college student. While you were in college you didn't have a lot money and did whatever you could to get a meal and make ends meet. That same philosophy can be applied to reduce your monthly expenses until your financial situation improves.
• Pay more. Pay more than the minimum monthly payment. Pay the balance in full each month or pay multiple times a month. Divide the monthly payment by the number of weeks in the current month and send that amount each week.
• Crowd funding. Use crowd funding websites to get free money to pay down your debt such as Prosper, IndieGoGo and Kickstarter.
• Valuable. Sell something you believe is valuable such as: jewelry, art, furs, etc. and use that money to pay down debt.
• Taxes. Adjust your tax withholdings to get extra money during the year instead of waiting until February or March to get a huge tax refund. Use the extra money to pay down debt.
• Voluntary Simplicity Movement. Buy nothing new other than food and basic necessities - donate existing possessions to charity. Focus on being needs versus wants.

When paying debt know your rights regarding debt collection

FCRA

• Creditors cannot call before 8am or after 9pm but can call Monday-Sunday.
• Creditors must accurately report payment history on your credit report.
• Creditors cannot threaten, use profanity, insult or act in an unprofessional manner.
• Creditors can contact your neighbors to get your contact information but cannot disclose any information.
• Creditors must accurately report information – no errors or duplicates.
• Creditors can only report negative information for up to 7 years.
• Creditors must correct inaccurate information within 30-45 days and send an updated credit report.

FDCPA

• Creditors must respond within 30 days regarding disputes on your credit report.
• Creditors must accurately report information – no errors or duplicates.
• Creditors must provide a reason why you were denied credit.
• Creditor must notify you in writing of your obligation to pay a debt.

CARD Act of 2009

• Prohibits interest rate increases on existing balances.
• Credit card payments are applied to higher balances first.
• Consumers are given a reasonable amount of time to make payments.
• Monthly statements must list time and due date.
• Students can elect to receive solicitations, prohibits increasing limits, max limit $500, proof of income, credit history
• Consumers must opt-in for over the limit charges
• Consumers can get a free credit report if denied credit or unemployed

You Can Run But You Can't Hide From Your Debt

With the advancements in technology many debt collectors and some state taxing authorities are searching for consumers on the internet use social media networks such as Myspace, Facebook, Twitter, Linkedin and other sites to find unsuspecting consumers to pay debts. This seems unethical and illegal but it is legal.

According to the Fair Debt Practices Collection Act, debt collectors can contact your family and friends to find your location or get other personal information such as your address, email address or phone number. If you posted your contact information including your current employers on your social media profile you may soon be getting emails or phone calls from your debt collectors. What if a debt collector contacted someone who is listed as a friend on your social media profile?

If you love to use social media networks and are in debt you increase your chances of debt collectors finding you. The IRS has not confirmed whether they use social media networks to find those who owe back taxes but I suspect they do. The good news is that tax agents cannot friend a consumer who owes back taxes on a social media site but that probably doesn’t stop all tax collectors from doing it. Here are some ways you can be found on the internet:

1. Motor vehicle records
2. Employment records
3. Tax records
4. Bank records
5. Public inquiries at local businesses such as groceries stories, barbershops, church meetings, social and civic meetings, etc.
6. Internet search engines
7. Chat rooms and forums

If you owe debt and have not been contacted yet or have not paid your debt, contact the debt collector immediately to setup a payment plan or request a financial hardship and follow-up with a letter confirming the agreement. It is better in the long run if you contact them before they contact you.

How to Protect Yourself From Debt Collectors

The Federal Trade Commission (FTC) defines a debt collector as any person who regularly collects or attempts to collect a debt owed including a creditor who uses a third party to collect a debt.

Consumers should learn their rights regarding credit and debt collection to prevent harassment, prevent paying additional fees or money that is not owed and to protect their credit. The main act that protects consumers regarding debt collection is the Fair Debt Collection Practices Act (FDCPA) which can be found on the FTC website at ftc.gov/os/statutes/fdcpajump.shtm.

The FDCPA covers individuals, families and debt owed for medical bills, mortgages, car loans and personal credit cards. The act does not cover debts business debts owed. A debt collector can only contact you between 8am and 9pm. They can contact you at any number you provided on your credit card or loan application unless you tell them in writing or over the phone to stop contacting you at that number. A debt collector can contact other people to get your contact information if they are unable to find you or do not get a response from you. They are prohibited from contacting third parties more than once.

According to CNN Money the number of complaints against debt collectors threatening to use violence or using violence increased by more than 50% since 2009 to 2,517. Complaints against debt collectors using abusive language increased to 35% in 2009.

Debt collectors cannot ask for more money than what is owed, threaten violence, legal actions, jail, job loss, or property seizure. A debt collector must sent a written letter stating how much you owe within 5 days from the first time they contact you and must include the name of the original creditor owed, and the process to follow if you feel you do not owe the debt.

If you feel you do not owe the debt, send a written response with a return receipt within 30 days of receiving the letter requesting proof that you owe the debt. A debt collector cannot contact you again until proof has been sent. Here are some highlights of what debt collectors cannot do:

Debt collectors cannot: harass you with threats of violence or publish your name, use profanity, make obsessive phone calls, make false statements or send false documentation, misrepresent the amount owed or the company they work for, cannot state you will be arrested if you don't pay your debt, may not give credit information about you to anyone including a credit reporting company, may not collect fees or other charges on top of the amount owed unless the contract states so or contact you by postcard.

If you do not pay a debt owed, a creditor or debt collector can: sue you or garnish your wages. However, debt collectors cannot obtain garnishments from: social security, SSI or veterans, military, railroad retirement, foreign service or disability benefits, merchant seamen wages or FEMA disaster assistance.

If you feel a debt collector has violated the FDCPA you can sue them in a federal or state court within one year from the date the law was violated. If you win, the judge can require the debt collector to pay you for damaged incurred up to $1,000. Complaints can be filed against a debt collector with the FTC.