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North Carolina Debt Collection Laws - Here's all that you need to know!

There can be various reasons for getting into debt, such as a low-income source, expensive life events, poor financial management, co-signing, etc. However, getting out of debt isn’t an easy task.

According to the study conducted by Experian, the average consumer debt in North Carolina stands at $87,160 in 2021, from $84,343 in 2020. Various debt relief options can help you combat debt.

However, when you fail to keep up with the minimum monthly payments toward your debt, your payable balance will be sent to a debt collection agency in North Carolina. If you find yourself in this situation, you may be flooded with phone calls, emails, or letters from your collectors attempting to collect the debt. Thus, you must understand how North Carolina debt collection works, your rights against an NC collection agency, etc.

How does debt collection work in North Carolina?

North Carolina debt collection works by collection agencies or companies attempting to recover debts a couple of months past their due dates or much older debts. At first, you might receive a couple of phone calls or written notices from your original lender regarding payments towards your debt. If he is unsuccessful in recovering the amount, he may pass it on to a debt collection agency in North Carolina to recover it on his behalf.

Debt collection procedures depend largely on the company collecting the debt. Debt collection usually works in one of two ways: As a third-party company, a debt collection agency attempts to recover the amount from you on behalf of the original creditor. In this scenario, the agency receives a percentage share of the amount recovered from you. Second, a debt collection agency may buy out your debt from the creditor cheaper than the original amount and recover the debt.

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Can debt collection agencies in North Carolina take you to court?

North Carolina debt collection agencies can take you to court or file a legal suit against you until the debt is under the statute of limitation. Once the debt is beyond its statute of limitation, the debt collection agency can not attempt to recover the debt by filing a legal lawsuit against you.

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What is the Statute of Limitation in North Carolina?

The Statute of Limitations in North Carolina may vary depending on your debt. For most types of debts in North Carolina, the statute of limitations is three years. For instance, credit card and medical debt.

The Statute of Limitation (SOL) for debts is the time bar for collecting various debts, and it starts from the date you made the last payment towards the debt.

Debt collectors can attempt to collect debts even after the expiration of the period. However, according to the North Carolina debt collection laws, debts beyond their Statute of Limitations can not be taken to court.

That said, creditors or debt collectors may try to persuade you to make even a small payment toward the debt. In that event, your Statute of Limitation for that debt will restart from the date you made the payment. Thus, you must never make payments to get creditors or debt collectors off your back for the time being.

Also, it does not mean you should deliberately stop making payments toward your debts, and doing so can have negative impacts on your credit score. Instead, when you find yourself strangled in such a situation, you could look for other North Carolina debt relief options, like, debt settlement, consolidating your debts, filing for bankruptcy, etc.

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How does debt collection in North Carolina affect your credit score?

A creditor or debt collector may negatively report your accounts to the credit bureau. It signifies that you were delinquent in paying back to your creditors. This delinquency can cause serious harm to your credit score, and as a result, your credit score may drop significantly.

Your credit score between 670- 739 is considered a good credit score. However, your credit score could fall by 100 points when your account is sent for collection. Your credit score depends on your credit scoring system, and you may lose more points with a higher starting score.

Your credit score drops when your account is sent for collection stays on your credit report for about seven years, and reflects your eligibility for obtaining credit.

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What is North Carolina Fair Debt Collection Practices Act? 

Certain guidelines dictate your rights against debt collectors or can protect you from unfair debt collection practices. The Fair Debt Collection Practices Act (FDCPA) is the primary federal law regulating debt collection practices, and it explains acts or practices that are considered fair and prohibited.

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What can North Carolina debt collection agencies do? 

According to the Fair Debt Collection Practices Act (FDCPA), Debt Collection agencies in North Carolina can do the following:

  • Debt collectors can contact you anytime between 8 a.m. to 9 p.m. (unless you request some other time).
  • Debt collection agencies can contact you by email, phone, telegram, or fax.
  • Debt collectors can contact your relatives, friends, neighbors, or colleagues. 
  • Debt collectors can take you to court for debts within the statute of limitations.
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What can North Carolina debt collection agencies not do?

According to the Fair Debt Collection Practices Act (FDCPA), Debt Collection agencies in North Carolina cannot do the following:

  • Debt collectors cannot hide or provide false information to you regarding their name, agency, or the debt for which they are contacting you.
  • Debt collectors cannot call you repeatedly (more than once daily for the same debt).
  • Debt collectors cannot disclose information about your debts to anyone except your spouse and your parents or guardian if you are below 18.
  • Debt collection agencies cannot contact you at work if you request them not to.
  • Debt collectors cannot use profane language. 
  • Debt collectors cannot cause or threaten to cause harm to you, your family, or your property.
  • Debt collectors cannot collect more than you owe by including additional charges.
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What to do when a debt collection agency contacts you?

Check whether the debt and the debt collector are legitimate or not.

As you get a call from a debt collector, you must first verify whether or not the debt collector is legit. It would be best if you also confirmed whether you owe the debt mentioned or not. You can gather this information by simply requesting to provide details like their name, the collection agency, and the debt.

If they refuse to provide such information, it might indicate you are dealing with scammers. Also, a legit debt collection agency may not threaten you like, filing a lawsuit against you, for example.

After contacting you, debt collectors must send a written debt validation letter in five business days. The notice should state your right to dispute the debt’s legitimacy within the next 30 days.

You can dispute or negotiate the debt.

If you have doubts regarding the debt, you can dispute it by requesting to provide more information on the debt. You can do this by sending a validation letter, asking for more details of the debt, like the balance you owe, the original creditor of the debt, the debtor’s full name, how old the debt is, etc.

When the debt collector has received the letter, they must provide the information you requested. They may not continue to convince you to pay the debt if they fail to provide you with the information.

Even when the debt collector verifies your debt, before making any payment toward the debt, you also need to ensure that the debt is within the Statute of Limitation. It can be possible that the statute of limitations has run its expiration date, and the debt is no longer collectible.

After you confirm that the debt is yours, and if you find yourself in a tight spot, you can try to negotiate it. Although rare, some debt collectors may agree to accept only a portion of the debt, or they could work up a payment plan for you. If you and the collection agency can come to a payment agreement, make sure to put everything in writing to avoid any problems later. You can also consider a suitable debt relief option or contact an attorney for advice.

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Final thoughts

It can be overwhelming to receive calls from debt collectors. However, knowing your rights, what you can do, or the steps you should take can help make the situation manageable. Debt collectors have limitations or regulations that they must adhere to while collecting debts. In addition, if you find yourself in the middle of such a situation, you can consider a debt relief option to help you escape the situation. You can also consult an attorney to combat the crisis.

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