Collection agencies purchase unpaid debt from creditors. A credit card company may sell a delinquent account at a discount to a collection agency, with the agency then trying to recover this money from the debtor. Collection agencies usually send out letters and make phone calls demanding to be repaid the amount they are owed. By sending out a stop letter, debtors can stop this harassment, halting all communication between themselves and the collector.
In the United States, the Fair Debt Collection Practices Act was passed in 1978. This law was added on to the existing Consumer Credit Protection Act, which prevented employers from discriminating against employees who have had their wages garnished. The Fair Debt Collection Act helps protect the consumer by providing limitations on the lengths that a creditor may go to in order to collect a delinquent loan.
This act also provides individuals with the right to stop collection calls and letters, in addition to preventing intimidation and setting daytime hours during which a debtor may be contacted. Debt collectors may call multiple times a day or send letters frequently, but a stop letter prevents them from contacting you. Some people may not have the money to repay their debt or believe the amount owed is incorrect, and they do not want to be harassed while they sort out their financial matters.
Creating a stop letter is fairly straightforward. Send a letter to the debt collector stating that you are serving him notice, under the Fair Debt Collection Practices Act, to stop all communication with you. Always get documentation to prove that he has received your letter. This can be done by sending a certified letter via the United States Postal Service, for which the collection agency has to sign. The USPS will provide you with a copy of this receipt for your records.
A debt agency may call you one last time after receiving your stop letter, in order to let you know what its future actions will be. If the collection agency continues to call, be sure to record the phone calls. Under the Fair Debt Collections Practices Act, you can sue for $1,000. If the collector’s calls result in unemployment or poor health, you can sue for up to $500,000 to recover your damages.
Stopping communication with a collection agency will not eliminate your debt. Since they are unable to talk to you, collectors may escalate the claim by suing you in a court of law to recover their money. Each collection agency has its own criteria for deciding whether or not it will take a debtor to court. Since the legal process is expensive, pursuing legal action on small debt isn’t worth the agency's time in most cases.