All of this is governed by the FDCPA, but most of the players walk a very
fine line and cross over the line regularly. How to deal with them:

1. There is an FTC site on the debtors rights – read it.
2. Do not talk to collectors, nothing ever happens to information you
provide them that absolves you, they just keep calling because they are all
on minimum wage plus commission.
3. Put everything in writing, starting with a demand to see the proof of
the debt. You can send this letter as your friends attorney and
direct that all communication with your client stop immediately and all
further communications will be with you alone in writing.
4. Send a very strong letter to the original creditor. Before doing so, review the
Federal Credit Reporting Act. There is liability to a debtor that falsely or
negligently reports someone to the agencies.
5. Pull the once per year free credit reports from each
of the three agencies and see if she has been reported. If not, include a
warning to the collector to not report her to the agencies because she is
challenging the debt.
6. If she has been reported, have her send letters to each of the three
main reporting agencies (actually best if these come from your friend due to
privacy act issues) reporting her challenge to the debt.
7. All of this will just give her time to resolve the problem with the
original creditor. As you know, many of these schools are one step short of fraud,
over-charging for their classes and having very poor placement rates. Have
her investigate this school and see if they have a bad rep. She can then
fight them more than one issue. If the school is reputable, and she admits
she owes the money, the school can move her to collection unless she gets
some deferred payment plan in writing.

Most of the agencies have special handling of consumer small balance debt
where a lawyer sends a letter. They just stop collecting on it. Consumer
collection is a batch process: the agency gets a large batch of small
balance debts (say 10,000 accounts with an average balance of $100). They
collect against that batch until they reach some internal goal set based on
the age of the accounts and the creditor’s past history. That target usually
is under 20%. So when an attorney gets involve, they just stop collecting on
that one and focus on the remainder. The creditor, however, never forgets
and will put the amount due out again and again for collection.

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