Expert Gary Foreman

Question:
Gary,
My husband and I have one credit card debt to the tune of about $3,500. I cancelled the account so we can't charge any more. We have been making payments of $100 every month, which is well below the minimum payments that the credit card company requests. They call nearly every day, most often more than once, hounding us for the rest of our minimum payment, which has reached in the neighborhood of $800 a month. Although we are not paying what they request every month, we are making a payment. Is there any way we can stop the phone calls? Are we breaking the law by not paying the entire minimum payment? We do plan on making a large payment when we can, but with 3 kids and one income, $800 is hard to come by.
Thanks for any help.
Tina

Answer:
Tina's not alone. In calendar 2000 the average U.S. credit card debt per household was $8,123 according to Cardfacts.com. The American Bankers Association indicates that 5.4% of credit card accounts were delinquent at the end of the year. Recent reports show that there was a surge in bank card delinquencies in the 2nd quarter of 2001. So a lot of people are falling behind in their payments and will be dealing with bill collectors. In fact, in 2000 the FTC received approximately 22,000 complaints about both 'in house' and 'third party' collectors.

To answer Tina's first question, yes, she can stop the collection calls. The Fair Debt Collection Practices Act prevents harassment by bill collectors. It is a federal law so it applies to all 50 states. Section 806 specifies that "a debt collector may not engage in repeated personal contacts with a consumer with such frequency as to harass him".

If Tina notifies the collector in writing that she wants all communications stopped, they must cease any attempt at contacting her. This includes both phone and mail contact. She would be wise to get a return receipt so that she can prove that her letter was received by the collection agency.

Some bill collectors are persistent despite the law. According to the Federal Trade Commission approximately 500 consumers complained that notifying the collectors didn't stop the calls. If Tina has this problem she can get relief by contacting the FTC (1-877-FTC-HELP).

Tina didn't mention it, but collection agencies are also prevented from telling others about her situation. Nor can they threaten her with physical violence.

To answer Tina's second question, she has not broken the law so she won't end up in jail. But she has not lived up to the contract that she made with the credit card company.

Notifying the collection agency to quit contacting her does not prevent the credit card company from trying to collect the debt. In fact, they may be more likely to file a law suit if Tina asks to be left alone. That suit could require repayment or force bankruptcy.

So getting the collection agency off her back is only the first step for Tina. The $3500 debt is costing her over $800 per year in interest. And each month that her payment is less than the minimum a penalty is tacked on. Her $100 payment isn't really reducing the debt.

Now is the time to take drastic action. At her current rate of payments Tina will be repaying this debt forever. She needs to recognize that the longer this goes on without a solution the worse her credit score will be. She could get in a situation where it's almost impossible to borrow money to buy a car or home for many years.

So getting the collection calls to stop is only the first step. In fact, it's the easier step. The bigger challenge is to get the debt current so she doesn't hurt her future borrowing ability.

Hopefully Tina and her husband will find a way to put this debt behind them.

Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website www.stretcher.com/save.htm