A bill collector was having a hard time locating Frank, a Florida resident who had missed several car payments. Finally, he called Frank's mother and, claiming to be a hospital employee, told her that Frank's two children had been hurt in a serious car accident.

Frank's mother readily supplied her son's home and business addresses and phone numbers in Jacksonville, Fla. When Frank heard about the call, he spent seven frantic hours calling hospitals and police agencies before learning there had been no accident. But the bill collector accomplished his mission: The next morning, Frank's car was repossessed.

Outraged by the bill collector's tactics, a Florida jury awarded Frank $15,000 in damages.

In numerous other lawsuits, relentless bill collectors have had to defend themselves against claims that they harassed debtors unduly, with such abusive tactics as:

* subjecting the debtor to repeated phone calls at inconvenient times

* threatening the debtor with a jail term or loss of a job

* embarrassing the debtor by communicating news of the debt to neighbors and relatives

* calling the debtor a "deadbeat" or worse

* falsely telling the debtor that a judgment has been entered.

Recently, however, courts and legislatures have responded by cracking down on the abusive tactics employed by some bill collectors.

Early attempts at regulation were aimed primarily at collection agencies. But, increasingly, the legal rules are being applied as well to those who extend credit (particularly consumer credit) and attempt to handle collections themselves. (See Financial Tactics, page 111.)

Unless your company relies exclusively on collection agencies or lawyers to collect past-due bills, you should become familiar with the practices that can cause legal problems.

Though details vary from state to state, a national consensus is developing on the practices to be avoided.Here are some guidelines:

1. Avoid calling the debtor late at night or early in the morning. Some state laws specifically say that, unless you have the debtor's permission, you should make phone calls only between 8 a.m. and 9 p.m.

2. Be careful not to mislead or deceive a debtor by writing a collection letter on a lawyer's letterhead or credit bureau stationery. This tactic has sometimes been used to trick the debtor into believing that the matter has been turned over to a lawyer or collection agency for further action.

3. Don't send forms to the debtor that look like they are from the government or a court rather than from your company.Some creditors have created official-sounding agencies such as the Federal Bureau of Consumer Credit. Others have used forms that look like legal summonses to make the debtor think that a lawsuit has been started. Either approach is likely to land you in legal hot water.

4. Be accurate in describing what will happen if the bill isn't promptly paid. Steer clear of bluffing the debtor with untrue or misleading statements. Before you tell a debtor "you can go to jail if you don't pay" or "you'll lose your job if you don't take care of that bill," be sure that the statement is true. In most cases, it isn't.

5. Don't misrepresent the legal status of your claim. For example, avoid telling the debtor that you've started a lawsuit if you haven't done so, or that the court has entered a judgment against the debtor if that isn't true. However, if you plan to turn the account over to a collection agency or a lawyer if the bill isn't paid by a certain date, it's appropriate to inform the debtor of your intentions.

6. Accurately disclose your identity whenever you call a debtor. You'll invite some unhappy legal consequences if you pretend that you're calling on behalf of a governmental department or a collection agency.

7. Use caution once you learn that a lawyer is actively representing the debtor regarding your claim. In many states, the law prohibits you from dealing directly with a debtor (without the lawyer's consent) as long as that active representation continues. But generally you're permitted to send periodic bills directly to the debtor as part of your routine billing procedure -- even if a lawyer has entered the picture.

8.Don't contact the debtor's employer unless the debtor has given you permission in advance. There are a few exceptions to this rule, however. It's usually all right to contact the employer if you're only trying to locate the debtor or verify his or her employment.

9. Use discretion in the number of calls you make to the debtor. Daily phone calls may be treated as a form of harassment.

10. Help protect the debtor's privacy by sending written communications in sealed envelopes. A postcard may readily be seen by people who have no business knowing about the delinquent account.

11.If you give information about an unpaid bill to a credit-reporting agency, be sure to provide accurate information on the status of the debt. If the debtor has questioned the bill, or any part of it, let the credit agency know that the debt is in dispute.

What kind of legal trouble could you find yourself in if you violate the rules that apply in your state? Frequently, the violation of a bill-collection statute is a misdemeanor or civil infraction and can lead to your having to pay a fine. Where a company has flagrantly and repeatedly violated the law, state or local officials may be able to seek an injunction from a court to prevent further harassment.

Also, the debtor may be able to sue you for damages, which could include mental or emotional distress. Loss of a job or damage to the debtor's reputation because of improper collection tactics could also result in the award of damages.

In several cases, debtors have claimed that collection efforts caused physical problems. For example, a North Carolina woman told the court that she suffered a miscarriage because of repeated letters and phone calls from a local department store. And a Kansas woman blamed a finance company for aggravation of her multiple sclerosis. If proven, such claims can lead to costly verdicts against a business.

Even though a legislature hasn't passed a specific statute placing limits on collections practices, courts have allowed debtors to recover damages under various common-law categories. These include libel, slander, invasion of privacy, and intentional infliction of emotional distress.

In a case that reflects typical judicial attitudes, the Colorado Supreme Court recognized that "a creditor has a right to take reasonable action to pursue his debtor and persuade payment."

But, said the court, a creditor may not take action that "will probably result in extreme mental anguish, embarrassment, humiliation, or mental suffering and injury...."

The court went on to say that "a creditor must employ legal remedies to collect from his debtor and may not resort to self-help by means of oppressive conduct amounting to unlawful intimidation."

There is a clear trend in the law: Courts and legislatures have become more sensitive to the rights of consumer-debtors than to the plight of a businessperson who has problems getting paid for goods or services.

To avoid legal pitfalls in collecting bills, learn what practices are legally dangerous in your own state. And alert your key employees so that your company doesn't inadvertently step on a legal land mine.