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How to Sue a Collection Agency

When a third-party collection agency contacts you to collect a debt, they are governed by the Fair Debt Collections Practices Act and any applicable state collection laws. All consumers have rights under these laws, but if you don't know your rights, you may fall victim to an unscrupulous collection agency and suffer financial damages. If a collection agency violates your rights, you may have the leverage to sue the collection agency to recover damages and attorney's fees. Need to know how to sue a collection agency? Consider these tips when you're trying to decide whether it's practical to sue a collection company.

Document everything.
In order to successfully sue a collection agency, you first have to build a case against the company. You need evidence that the collection agency violated your rights. Keep a log of your contact with the collection agency and record every contact you have. Note the time and date, the person you speak with, the name of the collection agency, a claim number or account number and balance information. Don't conduct negotiations or settlement discussions over the phone. After you note the time, date and the name of the agent making the phone calls, hang up the phone and don't talk to the collections agency. If possible, record the phone calls. Note: you must inform callers if you are recording the phone call. When writing to the collection agency, always send letters via certified mail and request a return receipt so you have proof that your documents were received. Keep a copy of all documents you send.

Make note of all damages.
Some states require actual damages before you can sue a collection agency. If you've only had to deal with inconvenience, you may not be eligible to sue a collection agency. Emotional damages don't count in some states, so you may need to be able to prove actual financial damages in order to qualify to sue a collection agency. Financial damages could include wage garnishes or a bank account levy. If you apply for a loan and receive a higher rate than you would otherwise qualify for because of inaccurate or erroneous negative information from a collection agency, you might be able to sue for the difference in the cost of the loan. If you win a lawsuit against a collections agency, you may also be eligible to recover attorney's fees and some punitive damages. Keep in mind that this varies greatly from state to state, so consult a lawyer in your state to determine the laws that govern your particular circumstances.

The Statute of Limitations works both ways.
Just as collections agencies only have a limited period of time in which to pursue a legal action against you, you only have a limited period of time in which to sue a collection agency. Consult with the individual laws in your state, but in most states, you have one year from the date on which the collection agency violated the law to sue the collection agency. This is another reason it's so important to keep good records - so you can prove that your lawsuit occurred within the requisite period of time.

Using a lawyer vs. pro se representation.
Theoretically, the law should be simple enough that a person can represent him or herself in court. Unfortunately, that's rarely the case. If you're up against a lawyer or even a team of lawyers, it's a good idea to have a lawyer on your side when you sue a collection agency. Some lawyers work on a contingency basis, where they don't get paid unless you win your case. If that occurs, they get a percentage of your judgment - typically anywhere from 30-50%. The primary benefit of involving a lawyer is that the lawyer is usually more familiar with the law and its interpretation than you are, making the process faster and the court more willing to hear your case. Lawyers can also quote important case law that may make the difference between winning and losing your case. If you can't afford a lawyer or don't want the expense, look for a free legal clinic. Law schools offer legal clinics to expose students to real-life law scenarios. You can also call your state's Bar registration to ask for lawyers who volunteer their services or do pro bono work.

Bottom line: if you're thinking about suing a collection agency, make sure you follow all the right steps to give yourself the greatest chance of success. Document everything. Even if you choose not to hire a lawyer, seek free legal advice to ensure you have a case and the proper pleadings and case law.

If you want more info about suing a credit agency or want to learn how to repair your credit after dealing with a collection agency, check out the Credit Secrets Bible.

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