Alabama Collection Law: All You Need to Know

Alabama’s Collection Basics

Alabama collection laws exist to govern the relationships between creditors and debtors and, in particular, to enforce the obligations involved in a debtor-creditor relationship. Such relationships arise when a creditor (or lender) extends credit to a debtor (or borrower). There are also times when the creditor provides some good or service to the debtor on credit. In either case, the debtor ends up with the obligation to repay the creditor at some point in the future.
In Alabama, a creditor may begin to take action to collect the debt owed if the debtor fails to repay his or her debt. However, Alabama law does not regard this as a free license to engage in any tactics that are deemed appropriate to get the consumer to pay up . The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., restricts the ways that creditors can collect on debts.
The FDCPA aims to prohibit certain methods of debt collection including harassment, false statements, making threats of violence or criminal prosecution for unpaid debts, and all actions that abuse or harass a debtor. The act also restricts communication with debtors during certain hours.
Committing abusive practices while engaging in debt collection can leave one vulnerable to legal action. Those who are found to be in violation of the FDCPA can be found liable for damages due to their objectionable actions.

What Is the FDCPA

The FDCPA is a federal law that is important to Alabama debt collection law. The FDCPA limits the behavior of third-party collection agencies and lawyers and protects consumers from such abusive collection practices as (1) contacting you at unreasonable hours (generally, before 8 a.m. or after 9 p.m.); (2) contacting you at work if the collector has been advised that the call is inconvenient or prohibited by your employer; or (3) using profane or abusive language or threatening you with violence. The FDCPA also prevents debt collectors from misrepresenting the amount of money owed, threatening action that is not contemplated, or misrepresenting themselves as members of an attorney’s office. The FDCPA does not apply to in-house collection departments at businesses, banks or credit unions.

Alabama’s Debt Collection Laws

In addition to the federal FDCPA, Alabama law offers further protections to consumers in the state. For instance, debt collectors in the state must be licensed, and they must submit an annual application for renewal. Moreover, the application must include a certified check or money order for the sum of $50 and an application fee of $500 for the initial licensing. If the application is denied, the fee is returned, but if granted, the fee is kept in the state’s Treasury as a fund from which the state may refund such money to the licensee in limited amounts.
Since Alabama has its own laws regarding debt collection, it is important to reach out to a qualified attorney if you believe that you are a victim of illegal or abusive tactics used by credit or debt collection agents. Whether state or federal regulations apply to you in your situation, the Terrell Law Firm has the expertise that you need.

Alabama’s Debt Collection Statute of Limitations

In Alabama, the statute of limitations for various forms of debt can vary. Generally, the statute of limitations on credit cards is five years. A personal loan has a six year statute of limitations. A written agreement has a six year statute of limitations. The statute of limitations on past due medical bills is six years. The statute of limitations on unpaid rents is six years. Judgments are difficult because it’s an ongoing debt. The statute of limitations isn’t in response to the judgment. That is more difficult to provide information about.
Court Judgment Creditors have up to 10 years to collect on judgments. Most creditors are going to attempt to collect prior to that. However, there are some judgment creditors who know they’re in the 10-year period, and they may do a lot of collection actions to collect before the judgment expires.
Expired Debt When you talk about expired debt, you are talking about debt that would be barred by the statute of limitations. Creditors can’t try to collect on it. For instance, if a client has a six year statute of limitations debt and they’ve had it for seven or eight years and the creditor knows because the client hasn’t been making payments. The creditor can’t go on and attempt to collect on it or sued the client because the statute of limitations period would be barred.

Consequences of Improper Debt Collection

If a debt collector violates Alabama law, they could be faced with serious consequences. A judge may award a debtor up to three times the amount of the damages sustained due to the violation (or $1,000 for violations regarding telephone calls or $500 for other violations), whichever is greater. Additionally, a creditor found in violation of Alabama collections laws may be forced to pay the debtor’s attorney’s fees and court costs . In the most serious cases, their license to do business in Alabama may be revoked by the court.
There are no criminal repercussions as a result of violating these laws. However, if a debt collector is found to have harassed their client while performing unlawful collections activities, their client may be liable for the actions of that debt collector (in the case of a commercial collection agency) and the collector can be punished by the client by having their contract terminated or being sanctioned.

Consumer Rights and Correcting Debt Records

Consumer rights under Alabama collection laws extend to every individual, irrespective of any benefit acquired from the extension of credit or the loan, according to Ala. Code §§ 5-19-1 through -30 (1975). Therefore, regardless of any contractual rights, Alabama law dictates that a creditor must honor these rights. If a creditor fails to do so, the consumer has remedies.
Generally speaking, an aggrieved consumer must provide notice to the creditor that it intends to pursue available remedies under Alabama law. Notice requirements depend on the substantive issue that gave rise to a possible claim. For example, a debt collector has five days from completing an initial telephone debt collection contact with a debtor to provide a complete and accurate notice of the amount of the debt and a statement of the debtor’s right to dispute the validity of the debt and request additional information. Failure to provide this notice provides the debtor with possible grounds to prove a violation of the Alabama Fair Debt Collection Practices Act would be deemed a claim prohibited by federal law. See Ala. Code §§ 5-19-7 through -8 (1975).
Within 30 days after receiving a statement of disputed facts, a creditor must respond to the consumer disputing a statement of account. Ala. Code § 8-9A-20 (1975). If the creditor fails to respond, the consumer can bring suit to initiate other avenues of relief:

(1) On cause shown by the debtor, file a written complaint to the county commission with all supporting papers attached;
(2) File suit upon the claim and apply for the issuance of an injunction to prohibit the collection of the disputed part of the claim until a final judgment is made on the merits. If successful, the debtor will recover the reasonable value of the injunction plus the costs of court;
(3) File an action to enjoin unfair and deceptive acts, practices, fraud and trade practices.

Ala. Code § 8-9A-22 (1975); see also Ala. Code § 8-19-9 (1975). Consumers are to have consideration on an equal basis with creditors with regard to the remedies provided in Title 8 with the general provisions relating to all uniform acts under Alabama statutory enactment. Ala. Code §§ 8-19-10 through -12 (1975). This means that in the event of a dispute between a debtor and creditor, the debtor can sue the creditor. However, prior to any lawsuit, it is often preferred that the creditor, in good faith, reply to the debtor and resolve any factual dispute prior to expending the time and resources needed to meditate (or litigate) the issue.
If the creditor fails to accept a settlement offer during mediation, a consumer has rights under the Mortgage and Foreclosure Mediation Act governed by the Alabama Rules of Civil Procedure. specifically Rule 31 (2018) and Birmingham General Municipal Ordinance 17569 (2009-25). This law does not limit the consumer’s ability to soon the creditor once the statute of limitations has expired. However, it can place a road block in the creditor’s ability to foreclose on the property.

How to Successfully Deal with Collectors

Here are some tips on talking to collectors:

Verify the debt- Write to the collector and ask for verification of the debt. They must then provide evidence of the debt and their relationship to the debt (like a credit card statement with the account number still readable). If they don’t, they can’t collect. Sounds great huh? Well, this is seldom offered by collectors- so you’ll get little satisfaction from using this doosey. But if the collector inflates your balance, they may get tripped up here.
Try to negotiate a settlement. This one is very difficult, but it can be done. If you can get a collector to accept a reduced amount as payment in full, and its a large enough amount that you can set aside a little each month to pay them back, then good for you.
Keep a file of communications. Keep all correspondence you send to and from the collector, and document your phone calls. Note the date and time of the call, and what the collector said. Again, most of the time the collector will end up saying something illegal, and if you have it written down, you’ll be in a good position.
Request validation of the debt and be sure to list any disputes you have with the debt in writing.
Record phone calls you receive, and request that the collector never call you again. This one I’m torn on. It is illegal to record the collector without telling the collector you’re recording, and in fact, you need to inform the collector that you’re recording. If you have the guts to try this, and if you can manage to record the collector saying something illegal then you’re golden, but I’d recommend not doing this without knowing your state laws on taping phone calls. You may think recording your call is perfectly legal, but if Alabama requires both sides of a conversation to consent before recording, you can get sued for it. At the same time, it’s the hardest evidence to contest in Court.
Pay Collection Agency A to settle the debt with Creditor B. Sometimes a collection agency will verify that you have paid Creditor A, but then sell the debt to collection agency B. This is illegal, pay only collection agency A to settle debts with Creditor A.
Use debt settlement companies. Debt settlement companies are companies that tell people nowadays to stop paying their credit cards in order to let the debts become delinquent enough that the collections agencies will discount it off the amount owed. Since they can’t work for themselves and my understanding is that they aren’t allowed to encourage a debtor to go bankrupt, they can refer a client to a bankrupcy attorney with the explanation that it is their first recommendation. On top of that, they can negotiate a lower fee in the process. Be wary about dealing with Debt Settlement Agencies, but they can often reduce your credit card debt by a good amount.
Don’t ever give a collector your debit/credit card information over the phone. You don’t want them debiting your account without your knowledge do you? Give them a check or cash only.
Raise the issue of "sue or settle" with regard to the collector. Tell them you’re sueing them, and if you can afford to sue them, great! Otherwise settle for a small amount.
Watch out for letters threatening wage garnishment. Some states don’t allow garnishment for debts like open accounts. Check with an attorney if this happens.
Be wary if the creditor is state owned company (I think most are, but others may be private companies) they may be collecting for another state owned company. Their powers may be more expansive than you think.
Credit card debt is unsecured (usually). Mortgages are secured debt. Unsecured debt means that the credit card company loaned you money without requiring an asset as collateral. When you don’t pay, they won’t get their money back unless you have assets (like cash, cars, jewelry, etc…) that add up to the amount you owe. Besides that, there is no guarantee that the credit card company will see their money.
Pay attention to the first notice that arrives. Usually the collector only has to send a letter to you with a date and amount listed as well as the name of creditor. Don’t give them any information whatsoever, especially about the debt.
Credit card companies have to give you a notice of default, and allow you 30 days to cure before they sell your account. Pay attention to this, and consider paying them off before they sell the debt to a collection agency.
There is no statute of limitations in Alabama that will prevent a collector from collecting 20 years from now. You won’t get a free pass!

Resources and Assistance for Alabama Residents

Nonprofit debt counseling services. Many nonprofit services help consumers negotiate with creditors and may on occasion help you reduce a balanced owed. One of the best consumer helps in Alabama is affiliated with the Charlotte, NC Better Business Bureau, which scores creditors on fairness. This service, which can be reached at 1-888-996-CCCS, can also assist with budgeting.
Legal Aid. Legal aid agencies help many low-income consumers with debt problems, including loan shark debts. The legal help is subsidized for those that qualify. Lee County Alabama (Auburn) legal aid helps residents with limited means. As does the Birmingham legal aid. Alabama Legal Services offers a statewide reach for low income Alabama residents in need of legal assistance . Visit the website above to learn about Alabama legal aid options. Bankruptcy lawyers. It may help to learn about Chapter 7 bankruptcy options. Most county court websites, such as Tuscaloosa, offer information on how to file for bankruptcy. Many lawyers advertise on other sites such as Martindale, or Avvo, for example. Many Alabama lawyers (including those in Shoals, Montgomery, Birmingham, Tuscaloosa, Mobile, and Huntsville) now offer a free initial consultation with prospective clients. In the consultation, you’ll learn if you qualify for chapter 7 bankruptcy (how long your car can be held pending your monthly payments to the lender), and benefits and downsides to bankruptcy.