Dealing With Collection Agencies
Know your Rights and Negotiate Like a Pro With Collectors.
You’ve missed your credit card payment yet again, and this month you might actually miss your mortgage payment as well. Then out of the blue you get a call from a collection agency. You’re horrified and you don’t return the call. Then suddenly letters start to arrive…first notice…second notice…third and final notice...You’re in serious trouble with collectors and you don’t know how to get out.
Dealing with collectors can be a horrifying and shameful experience dealing with collection agencies can be stressful. After all, they are calling you on being irresponsible with repaying a debt – and they basically want their money! However many will use unfair and untrue tactics in order to get their money, so it’s up to you to know your rights. You can read about and protect your rights be reading the Fair Debt Collection Act for starters.
Here are a few additional tactics for negotiating with creditors – so you will know that you are being treated fairly by debt collectors:
Let’s start with how debt collection companies make their money. Basically debt collectors buy off the outstanding debts from lenders for mere pennies on the dollar. Typically the easiest lenders to get outstanding debts from are:
- Cell phone companies
- Telephone companies
- Internet service providers
- Credit card companies
- Personal loan lenders
- Public libraries
- Video stores
- Fitness center, gyms and yoga studios
- Television cable or digital providers
- Medical clinics
- Optometrists
- Dental clinics
- Car loan lenders
Lenders agree to this because they don’t think they’re going to get the debt owed from you. From there debt collectors will turn around and use ruthless tactics to recover what the debt you owe from you. You will hear from collectors at your job, home and wonder how and why they are contacting you. Most people, when contacted at work, will just give the collectors what they want to save face in front of an employer. If you don’t call a collector back, they will be ruthless in their pursuit of you - by phone at your home and place of work, and by mail and email.
Know your rights when it comes to collectors
If you do owe a debt collectors do have the right to contact you – however when and how is where you have rights. According to the Fair Debt Collection Act you have the right to request that a collector does not contact you at your place of employment, or if you prefer only via mail or email. By law it is illegal for debt collectors to do the following:
- Verbally threaten you in any way or use obscenities.
- Harass you at your place of work.
- Pretend to be a credit reporting agency.
- Call all hours of the day and night at home – this is harassment.
- Claim that you owe more than you actually owe.
- Claim to be a legal body and accuse you of breaking the law.
You can find a lengthier and more detailed description of your rights by visiting the Federal Trade Commission’s Fair Debt Collection Act.
What should you do if you’re contacted by a collection agency?
First off you need to verify that the debt and the amount of debt are accurate.
Next read your rights according to the Fair Debt Collection Act.
Next you will contact the collection agency to work out a repayment plan. However before you do this, understand that if you currently have other outstanding debts that aren’t under the collections agency you should really pay those off first. Once a debt is under collections it will stay on your credit record for up to 7 years, so you might as well pay off your other debts (that aren’t in collections) before paying off a debt in collections – make sense?
Once you’re ready to pay off your collections debt, follow these negotiation tactics:
- Contact the collection agency to negotiate a repayment plan – keep in mind that the collector probably paid off your debt from the original lender for peanuts, so try to negotiate a reduced amount owing. They will come out ahead anyway.
- As part of your debt repayment agreement, tell the collector that you want all traces of the debt in collections taken off of your credit record. Yes, technically this is illegal, but collectors will do it if they think it will get you to pay off the debt faster. It is a money making business for them after all.
- The collector will send you the terms of your repayment agreement – stick to it and pay back the amount agreed upon.
- Once it is paid in full the collector will send you the documented proof of your full repayment. Keep it! I can’t stress this enough as you might need it later on if the debt still appears as unpaid on your credit record and you want it removed.
Tips to remember when negotiating with debt collectors
- Know your rights – and don’t be afraid to tell the collector you do! Learn your rights by reading the Fair Debt Collection Act. If you don’t have Internet service, call the National Consumer Law Center at 617-542-9595 to request a brochure on What You Should Know About Debt Collection. Since many states operate under different debt collection laws you can also get advice from your local attorney general's office.
- Prioritize your debt – Don’t listen to the collection agency when they tell you that the debt they have in collection is the most vital to pay off. It’s already in collections and will affect your credit report for up to 7 years. It’s not going anywhere. Pay off your other debts, the ones not in collections first, so that more don’t end up in collections and negatively affecting your credit rating and record.
- Bargain with the collector on the balance owed – Remember they bought off your debt for pennies and are now coming after you for the full amount. They will make a lot of money regardless. So try to negotiate a reduced debt amount. Oftentimes collectors will take a reduced amount if they think you will actually pay it.
- Keep private information private - Don't give a debt collector personal information such as where you work, where you bank or your checking account number.
- Keep every record of contact with the collection agency – That includes taping all phone calls, recording notes and keeping all emails. It’s not illegal to tape a telephone conversation if you tell the collector you are taping the phone call at the beginning of the conversation.
- Demand a copy of your repayment agreement and a copy of your proof of payments – Always get it in writing!
- Ask to have the debt removed from your credit report after it’s paid in full – Many will agree to this if they think it will get you pay off the debt owed.
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