When it comes to unpaid debts, debt collectors are never far away. It’s their business after all. But, dealing with debt collectors is rarely pleasant. So, if you are struggling with debt, or you have a debt that needs to be paid, try to avoid the possibility of debt collection before that debt collector comes looking for you.
If you see trouble coming with debt, don’t stick your head in the sand. Instead, try to negotiate with the original creditor to work out something mutually beneficial. This may allow you to create a payment arrangement that works for both parties before the debt is sold on to a third-party debt collector.
Too late for that? If you have a debt collector trying to make contact, it’s essential you know how to handle the situation. The Fair Debt Collection Practices Act gives you certain rights, setting out guidelines regarding the way in which a debt collector can behave. In this guide, you can find out what those rights are, what a debt collector is not allowed to do, and what you can do to best resolve the issue.
What should you do when a debt collector first makes contact?
When the debt collector comes a-calling, it’s good to know what you should do – and what you shouldn’t do.
Be succinct: If a debt collector calls you, keep the conversation as short as possible. Don’t provide any information until you have more details about the debt. The debt collector is essentially interviewing you, trying to determine whether you have the capacity to pay. Simply stick to facts, stand firm, and keep it short.
Don’t pay straight away: Don’t feel flustered, and don’t feel pressured into paying out after that initial contact. Just as you would with any type of contract, you need to think it through, without rushing into an agreement. Don’t pay and don’t make any promise to pay. Do not provide any payment information the debt collector may use later on. Making even a single payment means acknowledging the debt. If the debt is past the statute of limitations, that new payment will reset the clock.
Get it in writing: It’s important that you determine whether the debt is yours. When the debt collector contacts you, ask for a validation letter. This should include the amount of money you owe, the name of the creditor, and what action to take if you believe you don’t owe the money. The debt collection agency must send this to you within five days of initial contact.
Gather the facts: After a debt is sold to a third party, it can be resold, and resold again. On this journey, facts can be skewed. Many debts sold in this way contain errors, including the amount owed and who owes it. Check the information provided in the validation letter, and gather your own records of the debt.
Keep good records: Keep records of all phone calls, messages, emails or any other form of communication with the debt collector. Be as organized as possible, keeping a file with all relevant communications, including the day and time of every point of contact. This paper trail could be invaluable if the debt collector breaks the law.
What are your legal rights?
Understanding your legal rights can help to reduce stress when dealing with debt collectors. It can also prevent you from having to pay a debt that’s not yours, while protecting you against debt protectors that are stepping outside of the law.
If, after receiving the validation letter, you don’t believe you owe the money, you can dispute the debt in writing. To do this, you must send the debt collection agency a letter within 30 days of receiving the validation letter, stating you do not owe the money. Once you have done this, the debt collector cannot contact you until the dispute has been settled.
Keep a copy of the letter, and be sure to send it certified. Otherwise, the collection agency could simply deny receiving it.
It’s worth bearing in mind that the Fair Debt Collection Practices Act provides debt collectors some rights too. Once the debt collection agency provides you with proof of the debt, such as a copy of the bill you owe, it is legally allowed to resume collection activities.
What are debt collectors not allowed to do?
Debt collectors don’t have the best reputation. However, they are bound by certain restrictions. So, if a debt collector does any of the following, you may be within your rights to make an official complaint.
Debt collectors must refrain from:
- Repeatedly harassing you with calls.
- Using obscene or abusive language.
- Calling you at work if you have asked them to stop.
- Calling you before 8am or after 9pm, unless you agree.
- Falsely claiming to be an attorney or a law enforcement official.
- Falsely claiming to be a credit bureau representative.
- Misrepresenting the amount of your debt.
- Talking to anyone but you or your attorney about your debt.
- Threatening to sue you unless they are planning to take legal action.
- Threatening to seize property or garnish your wages unless they intend to do it.
According to the terms set out by the Fair Debt Collection Practices Act, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) if your protections under the act have been violated.
Depending on the state in which you live, you may have additional consumer protections available to you as well. Check with your state attorney general’s office or legal aid in your area for more info.
What should you do next?
Once you have confirmed the debt is yours, it’s up to you to make the next move and deal with the issue. Here are some ways you can move forward.
When discussing payment with your debt collector, don’t be afraid to negotiate. Debt collectors are looking to turnaround payments in the shortest amount of time, to get on to the next debtor on their list. You may be able to negotiate a deal to pay less than the full amount if you agree to pay upfront. Offering 10% to 15% of what you owe could be a good starting point, to square up somewhere between 30% to 50%.
Alternatively, you may be able to negotiate a payment-for-deletion deal. In this, you agree to pay the debt collector the debt in full, and in return, the debt collector removes the collection account from your credit report. While this practice is not illegal, it is frowned upon by credit reporting agencies. Many debt collectors refuse to do it, but if you find one that will, it may help your credit rating later on down the line.
All in all, you need to work with your debt collector to devise a plan. Your debt collector simply wants to recover a debt. To do that in a fast and efficient manner, many debt collection agencies will agree to a payment plan or a reduced lump sum payment simply to get some money on the books and get on to the next job. Talk, negotiate, and see what’s possible.
- Get it in writing
Whatever kind of deal you settle on, it’s imperative you get the agreement in writing. Do not pay any money before everything is in writing.
- Pay up
Once you have written confirmation of the agreement, you can send your payment. Don’t provide debt collectors access to your bank account, and avoid paying with a personal check. Depending on the debt collections agency in question, they may offer a variety of ways to pay. A cashier’s check may a good option.
It’s also worth bearing in mind that you should not agree to anything you can’t afford. Setting up a payment plan or agreeing to a lump sum you can’t afford to pay won’t help you in the long run.
- Don’t stick your head in the sand
When debt collectors come calling, it can be all too easy to push the problem away and try to ignore it. Unfortunately, ignoring debt collection calls or other forms of contact can make the situation worse. Ignored calls may force the debt collector to attempt other ways to get in contact with you.
Debt collectors may then call you at work, and you may find yourself in the situation where the debt collection agency is garnishing your wages. In extreme cases, debt collectors may even initiate legal action. So, if you owe a debt, deal with it. Speak to the debt collector before the situation gets worse. Only you can work to make it better.
- Find a lawyer
Failing to deal with your debt collector successfully may result in you being served with a notice of a lawsuit. If this happens to you, find an attorney who specializes in consumer law to represent you in court. Check out the website for The National Association of Consumer Advocates to find its attorney lookup page.
Debt collectors may go to court with little proof of the debt owed. In some cases, the statute of limitations may have expired on the debt. However, the debt collector may still win the case if the debtor doesn’t show up in court to challenge the adequacy of the evidence. The chances of having the lawsuit dismissed are higher if the debtor shows up in court, with representation.