Unit 26.

Creditor Collection Practices

Read and translate the texts.

Creditors have many ways of collecting money from consumers who are unwilling or unable to pay their debts. It is understandable that creditors will take action to recover money or property owed them. However, in the past, some bill collectors engaged in unsavory practices. As a result, some debtors suffered family problems, lost their jobs, and had their privacy invaded.

These practices prompted Congress to pass the Fair Debt Collection Practices Act in 1978. This act protects consumers from abusive and unfair collection practices by professional debt collectors. It does not apply to creditors collecting their own bills. Under the act, the debt collector’s communications are limited to reasonable times and places. False or misleading statements as well as acts of harassment or abuse are strictly prohibited.

Calls and Letters. If you receive unreasonable or harassing phone calls or letters from a debt collector, you should report the collection practice to the Federal Trade Commission or to your local consumer protection agency. Under federal law, you can send bill collectors a notice demanding that all collection contacts cease. You might still owe the money, but the collection contacts would have to stop. You should also consider contacting the phone company, which has the power to remove telephones from anyone using them for harassment.

Repossession. As mentioned earlier, consumers sometimes post col­lateral when they take out a loan or sign credit sales contracts. The creditor can usually repossess, or take back, the collateral if the borrower defaults on the loan or obligation. Most states do not permit creditors to repossess if repossession would involve violence or a breach of the peace.

Once the collateral has been repossessed, the creditor can sell it and then apply the proceeds of the sale to the amount owed. Debtors are also charged for any costs incurred in the repossession and sale. After the sale, the debtor is entitled to get back any amount received by the seller that is in excess of the amount owed (plus expenses). However, if the sale brings in less than the amount owed (plus expenses), the debtor must still pay the difference.

Court Action. As a last resort, creditors may sue debtors in court for the exact amount owed on the debt. At times, the trouble and expense of suing in court make creditors avoid this method. However, creditors often sue debtors in small claims court.

Just because you are sued does not mean the creditor is entitled to collect the disputed amount. Consumers often have legitimate defenses, such as the fact that the goods were defective. As a result, if you ever receive a summons to go to court, don’t ignore it. If you cannot appear in court on the date set in the summons, contact the court clerk in advance to arrange for a postponement of the trial. In addition, contact a lawyer immediately. If you are unable to afford one, you may call the local legal services or legal aid office.

The main thing to avoid when being sued is a default judgment. This is a judgment entered for the plaintiff (creditor) and against the defendant (debtor). Most default judgments occur because the defendant simply fails to show up in court.

Garnishment and Attachment. A creditor who wins a court judgment against a consumer may still have trouble collecting if the consumer does not pay voluntarily. It was once common practice to have people imprisoned for not paying debts; however, this is no longer allowed.

One solution creditors use is to get a court order that forces the debtor’s employer to withhold part of the debtor’s wages and pay it directly to the creditor. This is called garnishment. The federal Wage Garnishment Act limits the amount that can be garnished to 25% of the debtor’s take–home pay (pay after taxes and social security deductions). Persons who are employed by the federal government or who receive other federal money, such as welfare or unemploy­ment compensation, cannot have their income garnished (unless the money is used to meet court–ordered child support payments). The act also prohibits employers from firing employees who have their wages garnished for a single debt. State laws may further limit and sometimes completely prohibit garnishment.

Creditors can also get possession of a debtor’s money or property by attachment. This is a court order that forces a bank to pay the creditor out of a consumer’s bank account or that allows the court to seize the consumer’s property and sell it to satisfy the debt.

Find the equivalents of the following words and expressions in the text.

Получать деньги; возвращать деньги; быть замешанным в грязные дела; вмешаться в личную жизнь; побуждать; агент по взысканию долгов; притеснение; оскорбительный телефонный звонок; контракт о сборе денег расторгнут; нарушение общественного порядка; превышать сумму долга; законная защита; юридическая консультация; заочное решение суда; истец; ответчик; наложение ареста на деньги должника, находящиеся у третьего лица; пособие по безработице; конфисковать имущество.

Answer the questions:

1. What ways of collecting money from consumers who are unwilling or unable to pay their debts do creditors have?

2. What act protects consumers from abusive and unfair collection practices by professional debt collectors? What was it prompted by?

3. Does this act apply to creditors collecting their own bills?

4. What is limited and prohibited under this act?

5. What is repossession?

6. Why should people avoid a default judgment when being sued?

7. What is the difference between garnishment and attachment?

8. Who cannot have their income garnished?

9. Why may state laws further limit and sometimes completely prohibit garnishment?

Match the words on the left with the correct definition on the right:

Invade	complainant.
Prompt	court order that forces the debtor’s employer to withhold part of the debtor’s wages and pay it directly to the creditor.
Plaintiff	urge.
Defendant	take possession.
Garnishment	violate.
Attachment	accused.
Seize	court order that forces a bank to pay the creditor out of a consumer’s bank account or that allows the court to seize the consumer’s property and sell it to satisfy the debt.

Problem–solving:

The Missed Payment

Orlando buys a used car from Top Value Cars for $1,200 and signs a contract calling for monthly payments for three years. After paying – $800, he misses a payment because of large doctor bills. Leaving home one morning, he finds that the car is gone. Top Value has hired someone to repossess the car in the middle of the night.

Problem–solving:

a. Assume that Top Value sells the car for $500 and incurs expenses of $200 in the repossession and sale. Will Orlando get money back, or will he still owe money to Top Value (even though he no longer has the car)? How much is owed, and to whom?

b. Is the action taken by Top Value legal? Do you think the repossession laws are fair? What arguments could creditors make in support of these laws? What arguments could debtors make against them?

Revision Tasks and Achievement Tests.

UNIT 1. What is Law?