Debt Collectors and the Law
Topics on this page:
- Who are Debt Collectors?
- Collection Agency Licensing Requirements
- Prohibited Conduct
- If a debt collector breaks the law
- Debt Buyers
- Frequently asked questions
Who are Debt Collectors?
Both federal and state laws govern debt collectors. Debt collectors include collection agencies, attorneys, creditors collecting for someone else, and creditors collecting under another name as well as others. Under the Fair Debt Collection Practices Act (FDCPA), creditors collecting for themselves are not “debt collectors.”
- Creditor: The person or company to whom you owe money.
- Third-Party Debt Collectors: Companies hired to collect debt on behalf of another entity, like a creditor.
- Debt Buyers: Companies who pay creditors to purchase debt portfolios. This may give the debt buyer ownership of the debt and the ability to sue you to recover money.
Collection Agency Licensing Requirements
Maryland law requires collection agencies to obtain a license from the Department of Labor, Licensing and Regulation. Any judgements obtained by a business not licensed at the time of filing are void. There is no time limit for asserting that a judgement is void due to lack of a collection agency license. You can check a collection agency’s license status through NMLS, a multistate platform for licensing.
If you believe a business is operating as an unlicensed collection agency, you should contact an attorney
Under the Federal Debt Collection Practices Act, debt collectors may not...
- Call you before 8 a.m. or after 9 p.m.
- Call, write, or visit you at work, if your employer does not allow it.
- Contact you while the debt is being verified.
- Contact you if you tell the collector in writing not to contact you (the creditor can still sue).
- Tell anyone else why the collector wants to get in touch with you.
- Trick or threaten to hurt you, use bad language, or call too much.
- Lie about the debt or about what happens if you do not pay. For example, they cannot say that you will go to jail if you do not pay, or that they will take a Social Security or pension check if you do not pay.
- Contact you directly if they know you are represented by an attorney. Instead they must contact your attorney.
Read the law: United State Code Title 15, Chapter 41. Subchapter V
Under Maryland law debt collectors may not...
- Use or threaten force or violence.
- Threaten criminal prosecution, unless a violation of criminal law is involved.
- Disclose or threaten to disclose information affecting your reputation for credit worthiness if they know the information is false.
- Contact your employer about a debt before obtaining a final judgment.
- Disclose or threaten to disclose to a person other than you and your spouse (or if you are a minor, your parent(s)), information affecting your reputation if they know that the person the debt collector is telling does not have a legitimate need for the information.
- Communicate with you or anyone related to you at unusual hours, too often, or in a way that harasses, oppresses, or abuses.
- Use bad language in communicating with you or anyone related to you.
- Claim, attempt, or threaten to enforce a right knowing that the right does not exist.
- Use a communication that resembles a legal or judicial process or gives the appearance of being authorized, issued, or approved by a government agency or lawyer.
Read the Law: Md Code, Commercial Law § 14-201 - 204
If a Collector Breaks the Act or the Law
- Contact the Maryland Attorney General's Consumer Protection Division or call their hotline at (410) 528-8662.
- Contact the Maryland Department of Labor, Licensing and Regulation (DLLR) Commissioner of Financial Regulation.
- Contact the Consumer Financial Protection Bureau (CFPB) and/or the Federal Trade Commission (FTC).
- File a lawsuit against the debt collector for violating the Maryland Debt Collection Act, which covers individuals and businesses collecting for themselves, as well as debt collectors. The Act provides that any collector who violates any provision of the Act is liable for any damages proximately caused by the violation, including damages for emotional distress, or mental anguish suffered with, or without accompanying physical injury.
- Sue under the Federal Act, which typically only covers debt collectors. You can do that in state or federal court. If you win, you could get actual damages plus up to $1,000 in extra damages. You can also get lawyer's fees.
Debt buyers are companies or individuals who buy debt from other creditors for a very low cost. Often, the original creditor or another debt buyer sold the debt because they were unable to collect. Debt buyers purchase the debt and then try to collect the debt themselves.
Debt Buyers must…
- Abide by the same rules as debt collectors do under the Federal Debt Collection Practices Act and Maryland Law mentioned above.
- Provide proof of the debt, including a document signed by the consumer when opening the credit card, or a statement showing the consumer used the account.
- Submit evidence that they own the debt, including a list of previous owners and any paperwork associated with the sale of the debt.
- Describe how much debt you owe, including principal, interest, and late fees.
Frequently Asked Question about Debt Collection
What will happen if I can’t pay my debts? Can I be put in jail?
No. The court will not put you in jail for not paying a consumer debt like a credit card bill, medical bill, or rent payment. However, the court could issue a body attachment if you fail to appear when ordered. If you can’t afford to pay a consumer debt, the law limits what a creditor can do to collect it. A creditor CAN take you to court and get a judgment against you. If a creditor has a judgment against you, it may be able to garnish your wages or ask the court for the money in your bank account. However, the court cannot garnish most federal benefits to pay debt.
Failure to pay other types of debt, like child support or restitution ordered after a criminal conviction, may result in jail time.
What will an unsecured creditor do if I don’t pay a debt?
If you don’t pay a debt, the creditor may call you or write you to ask you to pay the debt. The creditor may send your debt to a collection agency. The collection agency may also call and write. Sometimes these calls or letters can be harassing.If you write a letter to the collection agency and ask them to stop contacting you, they must stop contacting you. However, it will not prevent them from suing you.
If a creditor offers me a payment agreement, do I have to set up a payment plan?
You can set up a payment agreement with a creditor if you can afford to pay the debt. If you agree to a payment plan, get the agreement in writing. Keep copies of checks or money order stubs that you use to pay off the debt. It is important to keep a record showing that you made payments on or paid off the debt.
You do not have to set up a payment plan. If you can’t afford to make the payments, you shouldn’t agree to a payment plan.
How will not paying a debt affect my credit?
When you don’t pay a debt, most creditors report it to the national credit bureaus. This is how you get “bad credit.” If your credit is bad, you may have trouble renting an apartment, buying a car, getting insurance, or getting a loan. It may also make it harder for you to get a job.
If I don’t pay a debt, can the creditor take me to court?
Yes. If you don’t pay, the creditor may file a lawsuit against you. You should respond to the lawsuit by the deadline to preserve your rights, otherwise you could lose by default because you failed to respond to the lawsuit. If the creditor wins the lawsuit, it will get a judgment. A judgment is a final court order that states you owe money to the creditor. If a creditor has a judgment against you, it may be able to garnish your wages or ask the court for the money in your bank account.
Can a creditor take my Social Security or government assistance?
Usually, no. The court can only garnish federal benefits in particular circumstances – to pay delinquent taxes, alimony, child support, or student loans. Outside of these circumstances, creditors cannot access government benefits. Examples of government benefits include Social Security, Supplemental Security Income (SSI), Veterans’ benefits, Unemployment benefits, Workers’ Compensation, and Temporary Cash Assistance. Creditors are also unable to access some other private disability income benefits and most pensions.
Can a creditor take the money in my bank account?
If a creditor has a judgment against you, it can ask the court for the money in your bank account. This may result in the bank freezing your account and paying the money to the creditor. However, you can stop a creditor from taking your money if you have $6,000 or less in your account or if the money in your account is from Social Security or other government or retirement benefits.
If your bank account is frozen, you will need to file a paper called a “motion” with the court to get to your money. You should contact a lawyer right away to get help. You should file your motion within 30 days to get the most protection.
Can a creditor take my wages?
If a creditor has a judgment against you, it can ask the court to order your employer to “garnish” your wages. When the court garnishes your wages are garnished, your employer pays part of your wages directly to the creditor. Your wages cannot be garnished if your disposable wages are less than 30 times the minimum hourly wage per week.* In any event, no more than 25% of your disposable wages can be garnished. This means that you will receive at least 75% of your disposable wages. Your disposable wages are your wages after subtracting the required deductions for federal, state, and local taxes, Social Security, unemployment insurance, State employee retirement systems, and health insurance. This is not true for child support garnishments, which are not consumer debt.
*This means the court cannot garnish your wages can’t be garnished if you make less than $217.50 per week.
Can a creditor take my personal property, like my furniture or clothes?
If a creditor has a judgment against you, it can ask the court to have the sheriff take or “levy” some of your personal property. Then, the creditor can ask that the sheriff sell this property, and pay the money from that sale to the creditor. It is very unusual for a creditor to try to sell your personal property, because it often costs more to sell the property than the property is worth. Creditors cannot sell any of your property unless the “fair market value” of all of your property is more than $6,000. The “fair market value” is the money you could get for the property in its current condition, if you sold it at an estate or yard sale. It is NOT what you paid for the property.