Legal Provisions for Preventing Abusive Collection Process

Banks and lenders generally assign the task of making collections from defaulting debtors to third-parties called collection agencies. These agencies will send urgent reminder letters to the debtor asking him to pay the lender directly or be prepared to face an adverse credit report and hard collection action.

Since agencies often tend to get abusive and threatening in their debt collection process, legal provisions have been instituted to protect debtor interests. The Fair-Debt- Collection-Practices act 1977 is a Federal law for this purpose that is comprised in the Consumer-Credit-Protection-Act.

This law says that debt collection agencies should not make false/misleading representations to debtors- this implies they should not state that they will do something, that is illegal or which they don’t propose to do to collect the debt. The act also allows debtors to dispute and authenticate debt information. The act also says that the state laws will override the federal laws regarding fair collection process if they are stricter.

The ACA that is a trade group consisting of collection agencies as members also strictly regulates them by prescribing their ethical code. The ACA says that debtors should be treated with esteem and every collection agency should have an officer to handle debtor complaints.