Podcast Summary: The Jordan Harbinger Show - Episode 1188: Debt Collection | Skeptical Sunday

Overview

In Episode 1188 of The Jordan Harbinger Show, titled "Debt Collection | Skeptical Sunday," host Jordan Harbinger and co-host Nick Pell delve deep into the often intimidating world of debt collection. Joined by Trevor, a writer, researcher, and self-described former "deadbeat," the trio unpacks the mechanics of debt collection, consumers' rights under the Fair Debt Collection Practices Act (FDCPA), and practical strategies for handling debt collectors. The episode aims to empower listeners with knowledge to navigate debt-related challenges effectively.

1. Understanding the Debt Collection Process

What Happens When You Stop Paying Your Bills

Trevor begins by explaining the initial stages of delinquency. When a credit card bill goes unpaid for 30 days, the borrower receives a warning, and their credit score takes a significant hit. Continued non-payment leads to increased attempts to collect the debt.

Charge-Offs Explained

At [03:35], Trevor introduces the concept of a "charge-off," stating:

“Charge off is what they call it when the credit card company assumes you're not going to pay and sells the debt to third-party collectors.”

A charge-off occurs when the original creditor writes off the debt as a loss and sells it to a debt collection agency, often at a steep discount. For example, a $5,000 debt might be purchased for as little as $50 by the collector, making the collection process a lucrative business model for these agencies.

2. The Fair Debt Collection Practices Act (FDCPA)

What Debt Collectors Are Permitted To Do

Nick Pell highlights that third-party debt collectors operate under the FDCPA, a federal law designed to protect consumers from abusive collection practices. According to Trevor, debt collectors can:

• Call During Specific Hours: They are allowed to call between 8 AM and 9 PM local time [07:36].
• Contact Third Parties Sparingly: They can contact a third party only once to locate the debtor.
• Send Written Notices: These notices must inform the debtor of their right to dispute the debt within 30 days [07:58].
• File Lawsuits Appropriately: If necessary, collectors can sue in the correct venue, either where the debtor lives or where the contract was signed [08:33].

What Debt Collectors Cannot Do

The FDCPA imposes strict limitations on debt collectors' actions to prevent harassment and abuse:

• Communication Restrictions: No multiple calls during meal times or late at night.
• No Harassment or Abuse: Collectors cannot swear, threaten arrest, or impersonate authorities [14:18].
• Honest Representation: They must accurately represent themselves and cannot falsify information about the debt or legal actions.
• Limited Third-Party Disclosures: Only the debtor, their spouse, or an attorney can be informed about the debt [16:10].

Trevor emphasizes the importance of being aware of these restrictions to defend against potential FDCPA violations:

“If you have a win, that’s $1,000 in your pocket.” [10:53]

3. Legal Protections and Rights

Statute of Limitations on Debt

The statute of limitations varies by state and determines how long a creditor has to sue for the debt. For instance, some states like North Carolina and Mississippi have a three-year limit, while others like Rhode Island and Ohio extend up to ten years [25:09]. Understanding this timeline is crucial as attempting to collect beyond this period can render the debt legally unenforceable.

Debt Validation Process

At [37:18], Trevor advises:

“If you're dealing with one of these companies, the first thing you should do is tell them you want to validate the debt.”

Requesting debt validation in writing forces the collector to prove the legitimacy of the debt, often causing them to abandon the pursuit if they cannot provide adequate documentation.

Potential Legal Recourse

Consumers can sue debt collectors who violate the FDCPA. Each legitimate complaint can result in $1,000 in statutory damages [10:53]. Trevor shares his personal success in obtaining default judgments against collectors who breached the law by threatening relatives [12:41].

4. Practical Advice for Handling Debt Collectors

Don't Engage Unnecessarily

Nick Pell advises avoiding unnecessary conversations with debt collectors:

“If you're getting hassled by a debt collector, the best thing to do is ignore them until they start threatening to sue.” [31:00]

Requesting Debt Validation

Formalizing a debt validation request involves sending a written letter via certified mail, ensuring proof of receipt. Until the debt is validated, collectors must cease all contact [37:41].

Negotiating from a Position of Strength

Given that collectors purchase debts cheaply, they often have significant leeway to negotiate. Trevor suggests:

“You're negotiating from a position of strength because they absolutely want to take care of this as quickly, quietly, and easily as possible.” [41:02]

Avoiding Payment Traps

Making partial payments can inadvertently restart the statute of limitations clock, making an otherwise unenforceable debt legally actionable once more [27:13]. Therefore, Trevor advises against making any payments unless the debt is fully validated and enforceable.

5. Navigating Debt Relief Companies

Identifying Shady Practices

Two main types of debt relief companies are flagged as problematic:

• For-Profit Companies: Often scams that require paying fees without delivering tangible assistance.
• Lead Magnet Companies: Collect personal information only to sell it to telemarketers or other entities.

Legitimate Non-Profit Debt Relief

Non-profit organizations can offer genuine assistance by helping consumers create budgets, negotiate with creditors, and consolidate debts without hidden fees [43:42]. Their success rates range between 50-70%, typically taking three to five years to fully eliminate debt [44:38].

6. Key Takeaways and Conclusion

• Know Your Rights: Understanding the FDCPA empowers you to recognize and defend against illegal debt collection practices.
• Stay Informed: Awareness of your state's statute of limitations and the debt validation process is crucial.
• Selective Engagement: Limit interactions with debt collectors to prevent unwanted legal repercussions.
• Seek Legitimate Help: Utilize non-profit debt relief organizations for structured assistance in managing and eliminating debt.

Nick Pell wraps up the episode by reiterating the importance of informed action and utilizing legal protections to navigate debt collection challenges effectively. Listeners are encouraged to consult legal professionals for personalized advice and to leverage resources provided in the show notes for additional support.

Notable Quotes

• Trevor on Charge-Offs:
  “Charge off is what they call it when the credit card company assumes you're not going to pay and sells the debt to third-party collectors.” ([03:35])

• Trevor on Debt Purchasing:
  “They’re paying 10% of your debt for the privilege of trying to collect the whole thing.” ([05:19])

• Trevor on Legal Recourse:
  “Every complaint, well, every legitimate complaint you make against a debt collector under the Fair Debt Collection Practices Act costs them a thousand bucks.” ([10:53])

• Nick Pell on Consumer Rights:
  “The main thing I want people to take away from this is that you have rights when it comes to dealing with third-party debt collection agencies.” ([36:31])

Resources Mentioned

• Consumer Financial Protection Bureau (CFPB): Offers guidelines and resources on debt collection practices.
• Non-Profit Debt Relief Organizations: Links and recommendations provided in the show notes for listeners seeking structured debt management assistance.

Final Thoughts

This episode serves as a comprehensive guide for anyone grappling with debt collection, offering both legal insights and practical strategies. By demystifying the debt collection process and highlighting consumer rights, Jordan Harbinger and his co-hosts equip listeners with the tools needed to confront and manage debt-related challenges confidently.