Debt Collection Agencies Struggling With More Disclosure Restrictions

A lot of debtors are dealing with debt collection phone calls regarding past due debts which were originated and charged off in the past. It is common that the debtor has forgotten about the debt and has now moved on with life and past the worries of paying the debt. Once they receive a call or letter from the debt collection company they may not have even been aware of, it could be a confusing and scary event. Many debtors don't understand what statue of limitations represents and the right they have when it comes to not having to repay the debt. States are now stepping up new rules which require debt collection agencies to explain to the debtor in clear writing in letters that they can't be taken to court over the debt in question.

Quite a few states, including New York have adapted these new rules in an effort to educate and defend the debtors. Lately, New Mexico joined up with the ranks of states coming on board using the new regulations. A lot of politicians and debtors identify that as a victory in the fight to stop shady debt collection companies from using scare methods to bait the debtor into paying debts which have surpassed the statue of limitations. In some states, such as New Mexico, a credit card debt passes the statue of limitations after four years. This will likely prevent a debt collection company from taking a person in debt to court in regards to delinquent financial debt that is greater than four years of age. The majority will agree this new rule is beneficial for most but collection agencies argue that this will only force credit card issuers and other companies who hand out loans to raise interest rates and decrease lending within a already tight credit market. Additionally, collection agencies alert that in the current economic conditions this will likely only slow down the recovery of loan providers.

Collection agencies can collect on a unsecured debt normally as long as they really want. If a debtor ask do they have to pay the debt or not, a collection agency must tell them they do not have to pay the debt but it can always show up on a credit score should they continue to refuse to pay the debt. Whether or not the debtor can't be taken to court, the debt can still be documented on a credit report which could haunt the debtor for years to come when they attempt to finance items on credit. Several collection agencies are worried if the person in debt is advised they won't be pursued in the courtroom, they will refuse to pay the debt all together whether or not they discuss the credit reporting impact as numerous of the debtors typically are not concerned with personal credit score as it has already been damaged and beyond repair for years in the future.

Both sides appear to have good reasons to be worried about the new rules and will also take time to discover how the public reacts to the new changes. Most always support new rules to prevent debtors from being taken advantage of but will undoubtedly are repaying a higher rate of interest as collection agencies cannot recover the amount of money at prior rates.

By: Luke McCann

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Luke McCann is the owner of DebtCollectionQuote.com and has worked with a Winston Salem Collection Agency and a Greensboro Collection Agency to be able to improve collections while working within FDCPA guidlines.