When Debt Collectors Call: What You Need to Know

March 18, 2012— -- With many Americans struggling to pay their bills one business is booming: debt collectors.

But many consumers say the collectors are taking their tactics too far. The Federal Trade Commission received a record number of complaints about debt collectors last year -- nearly 181,000. second only to complaints about identity theft.

In response to the complaints, the FTC has been cracking down on collectors who don't follow the rules.

As Tim Bond of Montgomery, Ohio, learned, consumers have to be very careful.

Bond, 56, said he was shocked one day to open his mail box and find a letter saying he was being sued by Asset Acceptance over a debt he wasn't even sure was his.

"I received a certified letter from the courthouse that said I was being sued for over $7,000," Bond said. "I felt really suffocated and trapped."

Bond said he wasn't even sure he owed the credit card debt, and if he did, it was 14 years past due.

"My fiancé and I did a lot of research," he said. "What we found out -- if you said anything at all, just a wrong phrase or anything, it would start statute of limitations over again."

Asset Acceptance allegedly broke the law by threatening lawsuits on expired debts and reporting those old debts to credit agencies. The company has paid a $2.5 million fine to the government, even as it denies any wrongdoing.

Reilly Dolan of the FTC said that consumers need to be aware of the statutes in their states governing the ability of collectors to sue over old debts. It may be that for some older debts, there is no way collectors can legally force a consumer to pay.

Consumers have long complained of harassment and even threats from debt collectors, with some receiving terrifying calls from companies trying to scare them into paying up.

"Are you going to pay this bill or not? Or am I going to have to kill you?" one collector said in a call recorded by a consumer.

Another was recorded threatening: "We're going to have your dog arrested. We're going to shoot him up and we're going to eat him."

Tactics like these are illegal too.

For older debts, the amount of time collectors can sue for payment varies state by state, and can be anywhere from two to 15 years.

If the debt is large, offering to pay it off little by little to get the collector off your bak might seem like a good idea, but Dolan said that is not necessarily true.

"In most states if you pay a little bit of the debt it actually restarts the clock," Dolan said.

That means the old debt is suddenly reactived and you can face a lawsuit after all.

Bond didn't go that route, instead enlisting help from government consumer fraud officials. It worked, and the company backed off.