Imagine that you loan someone $10,000 with the understanding that they will pay you back on a monthly basis with interest. After a while, they fall behind on their payments, so you call them to discuss their financial status and encourage them to make a payment. But they dodge all phone contact and you’re not sure they are even getting your messages. No return phone calls. No contact. Nothing. Then you receive a letter in the mail that says something like this: “Pursuant to my consumer rights under the Fair Debt Collection Practices Act, I hereby demand that you cease and desist from any further attempt to contact me by telephone. Any further attempts at telephone contact will result in my taking legal action against you for violating my rights under Federal law.”
What would you do in this situation?
1. Meekly go away and make no further attempt to collect?
2. Ignore the demand and continue calling anyway?
3. Turn it over to a collection attorney?
The smartest thing to do in this situation would be to file a lawsuit against the debtor. When you look at it this way, it seems obvious that sending a cease communication notice to a creditor is a pretty dumb thing to do. It makes no sense at all if your goal is to work out mutually agreeable settlement arrangements with your creditors. Yet there are hundreds of debt settlement companies out there still using this obsolete and dangerous technique, not to mention countless debt information websites that recommend this approach and even provide sample letters.
When I first started doing debt negotiation in 1997, I worked hard to get the creditor to substitute my phone number for that of the client, so cease communication notices were rarely necessary because the creditor could contact me for an update any time they wanted to. I would only use cease communication notices with truly abusive creditors, the ones who refused to respect the rules and continued to harass or abuse the client even though they had received my power-of-attorney to speak on the client’s behalf.
Fast forward a few years. In the process of developing the operational procedures for a large debt settlement operation that handled thousands of clients, it became obvious that we would need an army of people just to field the auto-dialed calls from the creditors. Instead of this unworkable solution, we made the decision to coach consumers on how to screen the calls, report abuse, and generally tough out the collection process until we could negotiate realistic settlements on their behalf. This worked fine, and cease communication notices were usually unnecessary. Unfortunately, many other companies took the easy way out and simply sent out “C & D” letters to every creditor in the client’s file. This was done automatically, and without any analysis with respect to the frequency of the calls to the client or the nature of those calls. The result? A bunch of really angry creditors, a big increase in lawsuit activity (what other choice was the creditor given?), and a lot of unhappy clients.
Sadly, years later many companies and websites are STILL using or recommending this technique. Type “cease communication notice” into your favorite search engine and be amazed. I just did it and turned up more than 1.5 million hits!
Sending a letter like this is the exact OPPOSITE of the approach that I teach. What works best is communication in good faith. This is simply a matter of common sense. I’m not saying that you should subject yourself to abuse or harassment. But in that type of situation, a complaint letter is often more effective than a cease communication request anyway. Obviously, you also need to take measures to manage the volume of collection calls, which is simply a matter of screening. But it’s important to keep your creditors informed, let them know you haven’t disappeared or tried to skip out on your obligation, and that your intentions are to work things out when you have the resources to do so. Patient persistent explanation of your situation will win the day in the end.
It’s pretty simple, really. If you want to settle with your creditors, talk to them once or twice per month until you work out a deal. If you want to get sued, send a cease communication notice.
Regarding the above comment/question by Harel, it’s clear that the
Fair Debt Collection Practices Act (FDCPA) does not require that a
person owe the debt in question in order to utilize the provisions
of that Act. In fact, one of the key reasons the FDCPA was passed
was to protect consumers from collection activity on debts that are
disputed, and/or in cases of mistaken identity or identity theft.
So a cease communication notice would definitely be appropriate
under the conditions described, where the collector clearly has the
wrong person. Perhaps a better strategy though would be to use the
provision of the FDCPA that allows a consumer to demand validation of
the debt in question. A collector is required to suspend collection
activity until verification of the debt is obtained and mailed to the
consumer requesting it. Such written communications to debt collectors
should always be sent via Certified Mail with Return Receipt required.
Thanks for the quick reply. That is good to know that I can send
a Cease and Desist. As for the second strategy, could you include the url
for a page that gives the details (or even a form letter one could modify)
for this “demand for validation of the debt in question” thanks.
There is no specific URL on my site pertaining to this, but
nothing special is required. State your name and address, the date
of the letter, and address it to the agency that’s attempting to
collect. Include their reference number if you have a written
notice from them. Then state something like the following:
“Please provide verification of your claim under the referenced
account number. I hereby request copies of the original account
agreement, a record of all transactions on the account from inception,
and any other documentation that will support your claim.”
Then sign and print your name, and you’re good to go. I’ve seen
lots of versions of this letter, and most of them are overkill. It’s
not necessary to cite specific FDCPA provisions or go into great
detail. Basically, all you’re saying with a validation letter is,
“Prove to me that I owe what you claim I owe.” Then the burden of
proof is on the agency doing the collecting.