By Attorney Kevin Trost
With the inflation rate hitting a 40-year high, more and more Americans are falling behind on debt payments because they can’t make required payments on their credit cards, loans cars and/or their mortgage.
When payments are missed, the creditor will usually first attempt to contact the debtor to settle their outstanding balance. However, if these attempts fail, the creditor can then resort to the services of a professional debt collection company. Federal and state laws regulate the activities of professional debt collectors.
Laws regulate debt collection practices
The Federal Debt Collection Practices Act (FDCPA) specifies how a debt collector may communicate with a consumer. A collection agent is required to send a written notice of initial validation within five days of the first contact with the consumer. This notice contains basic information about the consumer debt, including the original creditor’s name, account number, and amount owed. The notice must also include the means by which the consumer can dispute his debt.
The FDCPA and the Wisconsin Consumer Act limit when and how often a debt collector can contact a consumer:
- Calls must be made between 8 a.m. and 9 p.m. in Wisconsin. If a consumer is at work when a collection agent calls, he can tell the collector not to call him during his working hours. The collector must respect this request.
- A collection agent cannot contact a consumer more than seven times in a seven-day period without his prior consent. Also, unless the collector has the authorization, the collector cannot contact the consumer again within seven days of their last conversation.
- Debt collectors cannot use obscene or harassing language and cannot threaten the consumer with criminal prosecution.
The special case of automobile debts
If the debtor has defaulted on an auto loan, the lender may attempt to repossess the vehicle. If successful, the lender can then sell the vehicle. Any money from the sale is first applied to repossession fees and the outstanding loan balance.
Under Wisconsin law, a lender can try to repossess a vehicle in two ways. One option is that the lender can sue and seek a judgment granting the lender possession of the vehicle.
Alternatively, a lender can try to repossess the vehicle on their own. To do this, a lender must first send the debtor specific notices of intention to repossess on their own. The debtor then has the right to object to the lender taking this action. An objection would force the lender to instead seek a judgment of possession from the court.
If a lender conducts a self-help repossession, their agent cannot “breach the peace” when attempting to recover the vehicle. In other words, the lender’s agent cannot enter the debtor’s garage uninvited to retrieve the vehicle and cannot ignore the debtor’s verbal protests when he attempts to take the vehicle.
In sum, knowing the laws surrounding debt collection can demystify the process and help ensure that issues related to unpaid debts are resolved in a legal manner.
Kevin Trost is the founding attorney of Trost, LLC and as part of his legal practice advises creditors and debt collectors on proper collection procedures. He is a member of the State Bar of Wisconsin Lawyer Referral and Information Service, which connects Wisconsin residents with attorneys throughout the state. Learn more about wislaw.org.