Debt Collection Laws: What Seniors Need To Know
7 MIN READ
Published December 14, 2023 | Updated February 22, 2024
Many older Americans carry debt into retirement. For those living on a fixed income, paying their debts and daily living expenses can be difficult. When senior citizens don’t pay their outstanding bills, they eventually end up in debt collection.
Any type of unpaid consumer debt, such as credit cards, medical bills, personal loans, and auto loan debts, can go to collections. In this guide, we’ll provide you with information on what to expect when your debt goes to collection and elderly debt collection laws that protect you as a consumer.
How Debt Collection Works
Creditors can start contacting you by letters, emails, or phone calls as soon as you miss a payment. Once your debt is 180 days due, the lender can send your debt to a debt collection agency. Their job is to collect the money you owe.
Legally, a debt collector is required to identify themselves and provide specific information about the debt they’re trying to collect the first time they call you. This will allow you to determine whether the debt in question is yours. The information includes your name, mailing address, the original lender’s name, account number, and the amount you owe.
Debt collectors can try to contact you in person, by mail, text message, or email. However, they’re required to follow specific elderly debt collection laws when trying to collect.
Types of Debt Collectors
Debt collectors is a term used for any business or individual trying to collect an unpaid debt. However, there are several types of debt collectors that you should be aware of:
- First-party debt collector: This is the original lender that provided you with a credit card, loan, or any other service.
- Third-party debt collector: The original lender will hire a company to collect a debt in exchange for a percentage of the amount they collect or a flat fee.
- Debt buyer: A debt buyer is a business that purchases debts from the original lender and tries to collect them. Debt buyers may also hire a debt collection agency to collect debts.
- Debt collection agency: A collection agency is a business that solely makes money by collecting debts.
- Debt collection attorney: A lawyer who helps companies take legal measures such as collection lawsuits to collect debts.
How Are Seniors Protected From Debt Collectors
Navigating elderly debt collection laws can be confusing for many older individuals. However, if you’re receiving harassing phone calls or letters from collection agencies, there’re debt collection protections for seniors in place.
Fair Debt Collection Practices Act (FDCPA)
The Fair Debt Collection Practices Act (FDCPA) is a federal law that protects the rights of consumers against unethical and illegal collection practices. The FDCPA doesn’t allow debt collectors to harass you or engage in the following types of practices:
- Calling you at work
- Calling you repeatedly
- Using threatening or obscene language
- Threatening to harm you or your family members
- Calling you before 8 a.m. or after 9 p.m. without prior permission
The FDCPA also has a provision that requires debt collectors to immediately stop contacting you once you send them a cease-and-desist letter.
Other than the FDCPA, most states also have elderly debt collection laws that dictate what debt collectors can and cannot do. Some state laws may also cover the original creditor in addition to the collection agencies.
Many states also have unfair and deceptive acts and practices laws that can apply to collections. Each state also has a specific statute of limitations, beyond which debt collectors can’t take legal action for an outstanding debt.
Are Seniors Judgment-Proof?
Many older adults are judgment-proof, which means that their Social Security income and other sources of income can’t be garnished. In such situations, debt collection agencies may not bother filing a lawsuit against seniors because they’re unlikely to recover their money through garnishment.
The sources of income that are exempt include:
- Social Security
- Supplemental Security Income (SSI)
- Veterans Administration
- Alimony or child support money
- Civil Service Retirement System
- Federal Employee Retirement System
- Federal Railroad retirement, sickness, or unemployment
“There really isn't any special treatment given to seniors drowning in debt, but at least social security and other income is protected,” shares Teresa Dodson, debt expert and founder of Greenbacks Consulting. “Typically, your creditors will make an effort to work with you,” she adds.
How To Deal With Debt Collectors as a Senior
While it’s essential to be aware of elderly debt collection laws, it’s also important to know that you shouldn’t ignore a collection agency’s attempt to contact you. Instead, there’re ways to deal with debt collectors in a safe and informed manner.
Validate Your Debt
When a debt collector contacts you for the first time, be sure to validate the debt. Debt collectors are required to provide you with information that allows you to verify the amount, the original creditor, and other details about the debt. Don’t provide any financial or personal information until after debt validation.
Send a Cease-and-Desist Letter
If you’re finding debt collector calls stressful, you can send a cease and desist letter to stop them. Once they’ve received your request, they must stop contacting you. They violate the law if they try to call or send voicemails after your request. You can register a complaint against them at the Consumer Financial Protection Bureau (CFPB).
Dispute the Debt
When a debt collector sends you a validation letter with information about the debt they’re trying to collect, you can verify the details to ensure they’re accurate. Within 30 days of receiving the validation letter, you must send a debt dispute letter that demands the debt collector to prove that you owe the debt in question.
This requires the debt collector to provide relevant documents and detailed information to prove the amount you owe. If you fail to send the dispute letter within 30 days, the debt is considered valid.
Consider Debt Settlement
If your debt is legitimate, you must pay it. Fortunately, there are several senior debt relief options to choose from. If you’re unable to pay the full amount, it is possible to negotiate a lower amount.
For example, if you have senior credit card debt of $8,000 in collections, you can offer a lump sum payment of $5,500 to settle your account. This is just an estimate, and oftentimes, you may be able to save up to 50% of your total debt. Debt settlement can allow you to save a considerable amount of money and will put a stop to further collection attempts.
Examples of Harassment and Unethical Behavior by Debt Collectors
Some debt collectors may use aggressive tactics to collect the amount they owe. However, others may use unethical behavior and harassment, which are against elderly debt collection laws.
Here are a few examples of unethical behavior and harassment:
- Using inappropriate language, threats, and harassment over the phone.
- Threats to garnish government and retirement benefits.
- Threatening to sue over a debt after the statute of limitations has passed.
- Trying to collect a debt owed by a deceased spouse.
- Trying to collect a debt that you don’t owe.
Protect Yourself From Debt Collectors
You are your strongest advocate. Use the information on elderly debt collection laws we’ve provided in this guide to protect your rights. It’s also important to know that you’ll be in a much better position financially if you pay off your debts.
If you’re not sure where to start, get professional help with collections, or seek key resources such as financial assistance, senior stimulus programs, and other relief options. If a collection agency has filed a lawsuit against you, we recommend getting legal advice as soon as possible. It’s never too late to seek debt relief and come up with a feasible repayment plan so you can enjoy a debt-free retirement.