Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Apr 26, 2012

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Recent news reports have revealed that some debt collectors are willing to act outside the scope of the law in order to secure repayment on personal loans. It doesn’t matter if a collector is pursuing an auto, mortgage, payday, student, or any other type of personal loan debt, borrowers of all types of loans seem to be targeted indiscriminately.

As a result, it’s important for borrowers to know there rights. The Federal Trade Commission has released a Debt Collection FAQ, detailing the answers to some of the most common debt collection questions.

Can Debt Collectors Call Me at Any time?

It doesn’t matter if a borrower owes $1 or $1,000,000, nobody is permitted to be harassed by debt collectors. As a result, the Fair Debt Collection Practices Act (FDCPA) was created, and it restricts the hours in which a collections agency may contact debtors.

According to the FDCPA, collectors may only call a borrower between 8 in the morning and 9 at night, unless a borrower gives permission to be contacted at a different hour.

Additionally, if personal loan debt collectors are calling borrowers at work, borrowers can tell them either orally or in writing that their work place does not allow such calls. If told to stop, debt collectors are required by law to cease all contact to borrowers at their work.

Can Debt Collectors Call Anybody Else About my Personal Loans?

If a borrower has an attorney representing their debt, debt collectors are required to contact that attorney instead of the borrower directly.

But if a borrower does not have an attorney, debt collectors are only allowed to contact other people for basic information. Others may be asked what the borrower’s address is, what their phone number is, and where they work. Once a debt collector contacts a third party, that party is usually prohibited from being contacted again by the collector.

Outside of asking for public information, the debt collector is not permitted to discuss a borrower’s debt with anybody other than the borrower themselves, the borrower’s spouse, or the borrower’s attorney.

How Do I Know if a Debt Collector is Legitimate?

In order to ensure that a debt collector is calling about a real personal loan debt, borrowers should request a written “validation notice.” That validation notice will tell borrowers how much money they owe and it will contain the name of the personal loan creditor that they owe money to.

The validation notice is required to be sent to borrowers within five days of being first contacted.

If borrowers do not receive a validation notice, or if the validation notice does not contain accurate information, borrowers may send a written letter to the debt collector requesting to cease all contact.

The debt collector will no longer be permitted to contact borrowers after receiving that letter unless they send proof of the personal loan debt, such as a copy of the bill for the amount that borrowers owe.

Can Debt Collectors Garnish My Wages?

If borrowers do not pay back their debts, collectors will likely sue in order to force borrowers to repay. If a court ordered judgment is awarded to the collectors, then they may receive the right to garnish borrowers’ wages.

Wage garnishment occurs when debt collectors contact borrowers’ employers and has the employers redirect wages to them before issuing borrowers their paychecks.

That being said, debt collectors cannot threaten to garnish borrowers’ wages, as wage garnishment is something that can only occur by a court ordered judgment.

Can Debt Collectors Garnish Federal Benefits?

Some federal benefits are exempt from wage garnishment. The benefits exempt from debt collectors are:

  • Social Security
  • SSI
  • Veterans’
  • Civil Service, Federal Retirements, and Disability
  • Service Members’
  • Student Assistance
  • Railroad Retirement
  • Merchant Seamen
  • Longshoremen’s and Harbor Workers’ Death and Disability
  • Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
  • Federal Emergency Management Agency Federal Disaster Assistance

However, some of these exemptions may be pursued under certain circumstances involving taxes, alimony, child support, and student loans.

What if a Debt Collector Breaks the Law?

Borrowers may not be harassed, lied to, or threatened with arrest, foreclosure, or wage garnishment.

If a personal loan debt collector breaks the law in any way, borrowers have recourse to sue them within one year from the date the collector violated the law.

Borrowers can only seek repayment for damages lost, such as lost wages. In some instances, judges may award borrowers with an additional reward of up to $1,000 for pain and suffering.

Class action lawsuits, which occur when a group of borrowers sue a debt collector, may be rewarded with up to $500,000, or one percent of the collector’s net worth, depending on which is lower.

However, even if a debt collector breaks the law, borrowers’ personal loan debts do not go away.