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The Honolulu Advertiser

Posted on: Thursday, May 12, 2005

AKAMAI MONEY
With bill collectors, know your rights

By Deborah Adamson
Advertiser Staff Writer

Q: I have a friend who owes $800 in tuition from classes she dropped in 2002. The loan went to collections. She now owes $2,400, including interest and fees. She wants to pay the bill, but she can't afford to pay it all. The bill collector was nasty and he threatened to sue. I'm trying to help. She doesn't speak English very well. i Fred Llewellyn, Honolulu.

A: Your friend can try to negotiate repayment with the creditor or bill collector. If she prefers outside help, for $10 a month she can go to the Consumer Credit Counseling Service of Hawaii, the only member of the National Foundation for Credit Counseling in the state. If you can't afford the $10, the fee will be waived.

"It's not unusual for creditors to work something out," said Steve Levins, Hawai'i's Consumer Protector. "Contact the lender ... and see if they can agree on a repayment schedule."

What you shouldn't do is ignore the collections notice, said Wendy Burkholder, executive director of the Consumer Credit Counseling Service of Hawaii.

"Respond to the first notice. It shows that you're not trying to run," she said. "The longer you ignore it, the less likely they would be willing to work out a repayment schedule."

Sometimes, a bill collector will offer to wipe out your debt if you pay a discounted lump sum. For example, if you owe $3,000, the collection agency may offer to settle the bill for $1,500. But make sure to get the offer and details in writing because it could be a lie. The remaining $1,500 might go to another bill collector, who comes after you.

"In the client's head, it's pau, but it's not," Burkholder said. "This happens a lot."

If you're disputing the debt, ask the collection agency for proof that you owe the money. By federal law, they have to stop collecting from you until they provide verification. But you have to dispute the debt in writing within 30 days.

While you're trying to reach an agreement with the bill collector, one thing you shouldn't do is tolerate harassment or threats. It is against the law.

"That's exactly what they count on — you don't know what your rights are," said Norman K.K. Lau, a Honolulu consumer and personal injury lawyer who specializes in defending consumers against bill collectors.

According to the federal Fair Debt Collection Practices Act, bill collectors cannot harass you by calling you multiple times in a day, they cannot call before 8 a.m. and after 9 p.m. local time, and they can't make idle threats such as promising to arrest you, use foul language or misrepresent themselves.

They cannot contact a third party without your consent unless they are trying to find you. Bill collectors cannot, for example, call your employer to find out how much you make or tell a relative how much you owe to bring you shame.

For a free brochure on the Act, call Consumer Credit Counseling Service of Hawaii at 532-3225 or write to CCCS at 1164 Bishop St. #1614, Honolulu, HI 96813.

Hawai'i's debt-collection laws add another layer of protection.

To gather evidence, in Hawai'i you can legally tape your conversation with the bill collector secretly as long as you're the one in the conversation.

In Hawai'i, a collection agency cannot collect on a bill that's more than 6 years old because the statute of limitations has run out, Lau said. If it's an out-of-state collections agency, with some exceptions, they have to be licensed in the state before they can come after you.

To check on a license, go to http://pahoehoe.ehawaii.gov/pvl/app or call the state Department of Commerce and Consumer Affairs at 587-3222.

For details on state debt-collection laws, check out the Hawaii Revised Statutes 443B at www.hawaii.gov/dcca/main /hrs.

If they violate federal or state law, consumers can sue them.

For instance, one of Lau's clients owed $400. But the bill collector called his mother and told her about the debt — a violation of federal law. Lau settled the case for $4,500. Not only was the client's debt wiped out, he got $1,000 in a settlement while attorney fees were $3,500.



Got a consumer or personal finance question? Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.