« Previous  
 Next »

Fair Debt Collection Laws

01/03/02 12:00AM By Cheryl Hanna

If you're like me, your post-holiday bills are piled high on your desk and it's going to take some fancy juggling to pay them all off.

Most of us use credit with every intention of keeping up with the payments.

But with recent lay-offs and a tanking economy, many people are having trouble making ends meet. So it's a good time to remind everyone that even when you don't have cash, you still have rights.

For example, let's assume that you bought a new car when your job seemed stable and interest rates were non-existent. Maybe you were even a bit surprised that the bank lent you as much as it did, but you trusted that the bank could do the math better than you. That's a common assumption.

Well, beware: banks have allowed consumers to carry a greater debt load relative to their income in recent years, especially on secured items like houses and cars, where they have nothing to lose by making the loan.

Then hard times hit. Your company announced lay-offs. You couldn't afford your car payments, but you also couldn't afford to be without transportation to job interviews, so you panicked and parked the car at a friend's, fearing that the bank would reposes it. You knew it wasn't the right thing to do, but, desperate times, desperate measures.

Now, the bank may call or write to inform you of their intention to sue, and might even be able to send someone to get the car. But it may not talk to your employer or your neighbors or call you constantly on the phone.

It can't threaten any legal action it knows to be illegitimate, such as that you will lose your home if you don't turn over the car.

It can't harass you, or use abusive language, or threaten violence.

Two laws protect Vermont consumers from such practices. One is the Federal Fair Debt Collection Practices Act, and the other is the Vermont Consumer Fraud Act. Both laws protect consumers from unconscionable actions by collection agencies, although Vermont's law is far more consumer-friendly than federal law.

Nevertheless, consumers are increasingly suing collection agencies for unfair practices under the Federal Law.

Well, there is not one reported case under Vermont's law, but I don't think its because creditors use collection practices in Vermont that are kinder and gentler than elsewhere.

Rather, I suspect that we small town Vermonters don't want our family, friends and employers to know when we're in over our heads. So when the "repo-man" knocks on a Vermont door, we turn over the car instead of calling our local lawyer.

And because our law is so liberal, my sense is that those creditors who cross the line, and are called on it, quickly settle rather than litigate. It's cheaper to "punch and pay," so to speak, then to risk unfavorable legal precedent or bad publicity.

Now, some of you are out there shouting "individual responsibility." I hear you. We should all be more careful about consumer debt, and never trust banks or credit card companies to look out for our financial futures. At the same time, however, no one should suffer humiliation or fraud when hard times hit.

The law merely strikes a balance between a creditor's right to collect and a consumer's right to be free from abuse. Creditors know the law, but bank on the fact that consumers do not. Well, now you do.

This is Cheryl Hanna.

--Cheryl Hanna is a professor at Vermont Law School in South Royalton, Vermont.

comments powered by Disqus
Supported By
Become an Underwriter | Find an Underwiter