Dealing with Debt Collectors: Know Your Rights

Knowledge is your Best Defense When it Comes to Negotiating with Debt Collectors.

You have no bloody idea how it happened, but suddenly you are in debt. Sure you might have missed a few credit card payments, and because you were had money coming out of your savings to pay for your car loan, you bounced a payment for your student loan. However you had no idea it was so serious until you got that dreaded phone call from a debt collector. Now you’re afraid to answer the phone at home and at work, and what’s worse you’re receiving threatening mail and emails almost every other day from collectors.

How do you make it all stop?

A call from a debt collector is a shameful experience. What’s worse is that debt collectors are hardly sympathetic to excuses like job loss, illness or financial problems that are beyond your control. Debt collectors want you to pay back what you owe them – and they want it NOW! They know how to get your attention, and they can make life pretty embarrassing for you when they start calling your workplace, telling your boss they need to get a hold of you because you haven’t been paying your bills.

First off let’s start by exploring the mind of the rabid debt collector. As I always say, if you want to master your opponent, you must first know what makes him or her tick! A debt collector is an individual who makes their money – and quite a lot of it I might add – by purchasing outstanding accounts (unpaid debts) from lenders. Lenders, the people who lend you money or services that you promise to pay for, are constantly dealing with the headaches of unpaid accounts. If they know a debt is likely not to get repaid, they will cut there losses with a debt collector. As the lender sees it, the debt collector is at least offering them something, although much less, then the debt you owe.

The following lenders the prime targets of debt collectors because these particular types of loans, credit or services garner the most unpaid customer accounts:

• Cell phone providers
• Telephone service providers
• Credit card lenders
• Personal loan institutions
• Student loan lenders
• Libraries
• Video and computer games rental stores
• Gyms
• Cable service providers
• Internet companies
• Doctor’s offices
• Eye doctors
• Dentists
• Veterinarians
• Auto loan credit companies

Once the debt collector pays off your debt – and believe me it’s typically for peanuts compared to what the actual debt is worth – they will come after you for the amount owed on the original debt.

Dealing with a collection agency can be downright stressful. Especially when you don’t know your rights and they are using threats and false tactics in order to get their money. You bet they will use almost any dirty trick necessary, so it’s up to you to be aware of your rights according to the Fair Debt Collection Practices Act.

The Fair Debt Collection Practices Act was created by the Federal Trade Commission, in order to protect credit customers from abuse and deceptive tactics by debt collectors. It’s up to you to know your rights and to state them if debt collectors are treading unfair territory with you.

Debt collectors do have every right to call you on defaulted loans and unpaid credit cards; however they don’t have a right to harass you. You do have certain rights when it comes to the manner in which a debt is collected from you according to the Fair Debt Collection Practices Act. For instance if you are getting numerous phone calls at your place of employment, you have the right to request that these stop. Please visit the Federal Trade Commission website for a more complete copy of the Fair Debt Collection Practices Act. In the meantime, here are the basic rules that qualify as harassment from debt collectors:

• Uttering verbal or written threats as consequence for not paying a loan.
• The use of verbal or written obscenities – via mail or email – is illegal.
• Constant phone calls to your place of employment when you have requested other means to contact you (for instance a home number, cell number or email address).
• Debt Collectors can’t assume the identity of a credit bureau employee.
• Constant phone calls at inappropriate hours.
• Falsifying your balance owed.
• Debt collectors can’t claim to be a law enforcement officer or an employee of a legal government body.

Yes, you do have to pay back your loan; however you have every right to request that the creditor calls you at home instead of at work, or you can ask to be contacted only via mail or email if that’s your preference. However, you can expect debt collectors to get pretty inventive with how they get a hold of you if you ignore their letters or emails. At this point they have every right to get a hold of you by any means necessary.

If you are contacted by a debt collector the worst thing you can do is:

Ignore their calls – Take responsibility for your debt. You may even negotiate for them to remove the debt from your credit report.

Lose your cool – Anger will get you no where. Own up to your debt and work out a repayment plan to pay it off. Just as debt collectors can’t verbally assault you – you can’t verbally assault them either.

What you should do upon receiving a call or letter from a collections agency is the following:

Read and know your rights to fair debt collection - I’ve already mentioned that you can learn these by consulting the FTC’s Fair Debt Collection Practices Act. For further guidance you can also talk to a representative at the National Consumer Law Center by calling 617-542-9595 or consult your local attorney general's office for particular debt collection laws that apply to your particular state.

Make the debt collector aware that you know your rights and will make sure they are respected - Chances of a debt collector using sneaky tactics and harassment after this are very low.

Agree on a repayment plan with the collector – Don’t listen to the debt collector when he or she tells you that by law you must pay off this debt before you pay off debts that aren’t in collections. What they’re not telling you is that once a debt is in collections it will stay on your credit history for approximately 7 years. That’s why it actually makes sense to pay off your outstanding debts that aren’t in collections beforehand. Work out a repayment schedule that you can afford. Don’t let the collector bully you with false threats – and if they do tell them that you know your rights.

Record all contact with debt collections – All correspondence (emails and letters) should be kept and filed for future need. Also if you deal with the collector by phone tell them that you will be taping the conversation. This will likely put them on their best behavior. Also when you have agreed on a repayment plan get it in writing from the collector. The same goes for when you pay off the debt – get it in writing and keep it on file in case the debt appears again down the road.

Negotiate the debt owed – As mentioned, you are aware that the debt collector purchased your debt for far less than what the balance was. Make them aware that you know this, and try to negotiate a lower balance owed. They may agree to a reduced amount if they know you can pay if off. For more guidance on how to pay off your debt effectively read our article on 9 Tips for Do It Yourself Debt Reduction.

Request the debt be removed from your credit report – Tell the debt collector that you want the debt removed from your credit history as part of your repayment agreement. This is illegal, but many will resort to these types of tactics to get you to pay off your debt. If they agree – get it in writing!