Editorial Policy

Can debt collectors throw you in jail?

Erica Sandberg

August 29, 2014

QHi Erica,

A debt collector got my phone number through one of my family members and has started calling me. The debt is from 2012 and is originally from a payday loan and totals $620 right now. They are threatening to raise the interest rate on my debt if I don't pay by a certain date. And they are saying that they are going to file something against me with the city and that I could get hauled off to jail as soon as they make the call. Can they do these things? They are being nasty whenever they call me.  What are my options? –Patti

ADear Patti,

Good that you asked! The person who is contacting you is doing some but certainly not all legitimate things in trying to get you to pay what you owe.Ask Erica

First, he was legitimately able to access your contact information by asking anyone for your phone number. Such is his right under the Fair Debt Collection Practices Act, a federal law that governs the way third-party debt collectors communicate with debtors.

He is also allowed to call and explain, in as rude a tone as he likes, how he will proceed if you don't comply. Raise your interest rate? That's oddly worded, because the rates on rolled-over payday loans are already astronomical (in the hundreds of percentage points), but perhaps he meant that his agency is permitted to add interest to the flat debts it buys.

In many cases, such third-party collectors can tack on finance fees. The interest rate they may charge depends on the way the original contract was written. That rate would be spelled out in the fine print of what you signed when you initially borrowed money from the payday lender.

As for filing “something” against you, he is almost certainly referring to a lawsuit. The account is only two years old, which puts it within the statute of limitations of any state in the U.S., allowing a creditor to sue for an unpaid liability. Therefore, in all likelihood, the collection agency that has your debt can take legal action against you. If it goes that far, you could face a large monitory judgment (due to court and attorney costs being added on), as well as post-judgment collection action such as wage garnishment and property liens.

Jail, however, is almost never a consequence of nonpayment of consumer debt. That includes unsecured obligations, from credit card balances to medical bills to payday loans. Unless the lender can prove fraud, such as deliberately writing bad checks, the odds of spending time behind bars are extremely slim.

Pay what you owe, now. Use savings, sell something you own that is worth that amount, or ask a friend or family member to help you out. If you can't scrape up the entire sum, ask the collector if it will accept a settlement for less than the full balance. Do whatever it takes to satisfy this debt and expel the collector from your life. Make sure that you get any agreements in writing.

In the meantime, when this person calls again, tell him that you understand your rights and responsibilities under the Fair Debt Collection Practices Act. He is not permitted to threaten legal action unless he really will take that step, and he can't harass or lie to you. Tell him that one more peep about tossing you in the slammer and you will notify the Federal Trade Commission of his illegal actions. If he doesn't listen, file a complaint. After that, he and his company can be cited and fined for abuse.

Got a question for Erica? Send her an email.