Your Consumer Rights in Auto Loan Debt Collection

Getting an auto loan can be super confusing. There’s a lot of fine print and legal mumbo jumbo that’s hard to understand. What happens if you fall behind on payments? Do debt collectors have to follow certain rules when trying to collect? This article will break it down in simple terms so you know your rights when it comes to auto loan debt collection.

The Basics of Auto Loans

When you finance a car, you’re taking out a loan from a bank or dealership. This loan allows you to pay for the car over time, rather than all at once. You’ll make monthly payments on the loan for a set period of time, usually 3-6 years. The loan will have an interest rate, so you end up paying more than the original price of the car once it’s all said and done.

Auto loans can be tricky. Dealers often use tactics to get you to focus on the monthly payment amount rather than the total cost. You should always look at the total amount you’ll pay, including interest, not just the monthly payment. The longer the loan term, the more interest you’ll pay overall.

What Happens if You Fall Behind on Payments?

Sometimes life happens and you may fall behind on your monthly car payments. If you miss payments, the lender can report this to the credit bureaus, hurting your credit score. Here are some other consequences of falling behind:

• Late fees – Lenders will charge fees for late payments, often $15-50 per late payment.
• Repossession – If you become seriously delinquent, the lender can repossess your car, meaning they take it back.
• Deficiency balance – If your car is repossessed and sold for less than what you owe, you’ll owe the difference (deficiency balance).

As you can see, falling behind can seriously impact your finances. If you anticipate having trouble making payments, contact your lender immediately to discuss options. Never ignore calls or letters from your lender.

Debt Collectors Have to Follow Fair Debt Collection Laws

If you fall way behind on payments, the lender will often sell the debt to a collection agency. Debt collectors have to follow rules set by the Fair Debt Collection Practices Act (FDCPA). This law protects you from harassment by collectors.

Some key protections include:

• No calling at unreasonable hours – Collectors can’t call before 8 am or after 9 pm.
• Limits on frequency of calls – Collectors can’t call repeatedly in a short period of time.
• No harassment – Collectors can’t threaten violence, use obscene language, or repeatedly use the phone to annoy you.
• Validation notice – Collectors must send a written validation notice with details about the debt within 5 days of first contacting you.
• Cease communication – You can send a cease communication letter telling collectors to stop contacting you.

If collectors break these rules, you can file a complaint with the Consumer Financial Protection Bureau. You may be able to sue the collector for damages.

You Have the Right to Dispute Debts

If a collector contacts you trying to collect a debt you don’t recognize, don’t panic. First, ask for a validation notice by mail so you can review the details. If you don’t think the debt is valid, you have the right to dispute it.

Send a detailed letter explaining why you dispute the debt. Include your name, address, account number, and reasons for the dispute. State that you are exercising your right under the FDCPA to dispute the validity of the debt. Send this letter by certified mail. Collectors must stop collection efforts until they verify the debt is valid.

Statute of Limitations on Debt Collection Lawsuits

Debt collectors have a certain number of years to sue you to collect a debt, known as the statute of limitations. This varies by state, but ranges from 3-6 years in most states. The clock starts when you make your last payment. If the statute of limitations has passed, collectors can still try to collect, but can’t sue.

It’s important not to make any payment or partial payment on an old debt if the statute of limitations has expired. That can restart the clock! Consult a consumer rights attorney to understand the laws in your state.

Your State May Offer Additional Protections

Many states have their own debt collection laws that provide added consumer protections. For example, New York recently reduced the statute of limitations on debt lawsuits from 6 to 3 years. Contact your state Attorney General to learn about your rights under state law.

Get Help from Consumer Protection Agencies

Dealing with debt collectors is stressful. If you need help understanding your rights or resolving issues, contact:

• Consumer Financial Protection Bureau – CFPB.gov or (855) 411-2372
• Federal Trade Commission – FTC.gov or (877) 382-4357
• Your state Attorney General’s office – lookup contact info online

You can also contact a consumer rights attorney in your area who can provide legal advice and assistance. Don’t let abusive debt collectors take advantage of you – know your rights!