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PayPal is threatening to turn my account over to a collection agency (NCO). What can I do?
By Admin
Created 10/11/2004

First of all, collection agencies can only collect on a valid debt. If the debt is in dispute, you have the right to have that information added to your credit report and you can tell the collection agency to stop bothering you about the debt. In the US, the FTC regulates debt collections via the Fair Debt Collection Practices Act.

Here are some key points. Collection agents may not:

  • Call before 8 a.m. or after 9 p.m.
  • Talk to anyone but you or your attorney regarding the debt.
  • Threaten to garnish wages or seize property unless they actually intend to do so. Garnishment and seizures are not as easy as people think. Most require a court order. If it was so easy to get a garnishment or seizure, they wouldn't even bother with you on the phone.
  • Threaten to sue unless they are actually taking legal action. In some states, third-party collection agencies may not sue. This really is a great benefit to most people. Check with your attorney general or the banking regulators in your state to see if this applies to you.
  • Threaten you with arrest or jail.
  • Use obscene language.
  • Annoy or harass you with repeated calls.
  • Call at work if you have asked them to stop.
  • Lie about their identities. They must give their real names and the name of their company. They may not falsely claim to be an attorney, a representative from a credit bureau or a member of law enforcement.

    Anyone who gets a letter from a collection agency for a PayPal balance may have the right to dispute the debt. Any debt that is the result of fraud or a crime, certainly should be disputed. Any debt that comes from "buyers remorse" or people abusing the system could probably also be disputed. I recommend a letter sent via certified mail, return receipt requested and keep it straight to the point. Note the particulars, the date, amount, reference numbers, etc, and then simply use something like. "I dispute the validity of this debt. This is not a valid debt," and that's it. Short and sweet. You can also instruct them to stop calling you or contacting you over the debt regardless.

    If they keep calling or writing, start documenting everything. Names, dates, times, even put a phone recorder on your phone if it's legal in your state. (Most are, and any that go across state lines fall under federal laws, which say only one party has to know, and that's you.) Once you have a good list of abuses, you can either get a hold of the government or you can actually sue them in court for up to $1000 plus your lawyers fees. See Fair Debt Collection, FTC's Debt Collectors page and the FTC's Menu page for more info.

    Disclaimer: I'm not a lawyer. The above is not legal advice. It's my opinion. You are encouraged to seek a lawyer for legal advice. You can find one here.

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