If you’ve ever fallen into the clutches of a debt collector we don’t have to tell you how frustrating and infuriating this can be. A really evil debt collector will stop at nothing to collect from you. He may be calling you day and night or even at work. He could be threatening to sue you, to discuss your debt with your friends and family or even worse. What’s behind this is a secret of the debt collection industry. It’s that debt collectors are almost always paid on a commission basis. In other words, their earnings depend on how much they can extort from you. If they can’t successfully bully people into paying their debts, they could literally earn nothing that month. So, their entire focus is to move money from you to them using any means possible.
Tips for dealing with debt collectors
- Don’t panic and don’t say much
- Know your rights
- Dispute the debt in writing and ask for verification
- Be prepared to negotiate
- Try to have the debt removed from your credit reports
- Keep good records of all phone calls
Stay calm when you receive that initial phone call. No matter how threatening the collector might sound and no matter what he says about your debt, try to stay cool and don’t say very much. Just listen and take notes. The more you talk, the more ammunition you may be giving the collector. Let him do almost all the talking. Be polite and don’t panic. This might not even be a debt you really owe as the collector has it by mistake.
Here’s a video with some good tips about what to do the first time a debt collector calls.
Know your rights
A few years ago our Congress passed the Fair Debt Collection Practices Act or FDCPA. This act limits what debt collectors can do and spells out what they are not permitted to do. For example, they are not allowed to.
- Call repeatedly to harass you
- Call you prior to 8 a.m. or after 9 p.m. unless you agree
- Contact you at work if you have not given permission for this
- Misrepresent the amount you owe Claim falsely to be an attorney or a law enforcement official.
- Use obscene or abusive language.
- Speak with anyone but your attorney or you about your debt.
- Falsely claim to be the representative of a credit bureau
- Intimidate you by threatening to sue unless the agency actually plans to take legal action
- Threaten to garnish wages or seize property unless they really intend to do it
If the collector violates any of these restrictions
In the event that the debt collector violates any of these rules, you could file a complaint with the office of your state’s attorney general. If it gets really bad, you could hire an attorney and sue the debt collection agency for up to $1000, plus your lawyer’s fees and court costs.
Ask for verification
Here’s another secret of debt collection. Debts can be sold and resold numerous times. Most lenders will wait six months hoping that you’ll pay your debt. If you don’t, they will then bundle it up with a bunch of other debts owed by other people and sell it to a collection agency. In most cases, they only get pennies on the dollar. For example, your $500 debt might be sold for less than $100. The collection agency that purchases your debt could turn around and sell it to yet another collection agency that then sells it to a third agency.
This means the first thing you must absolutely do when contacted by a debt collector is dispute the debt in writing and ask for verification. You should send your dispute letter Return Receipt Requested so that you can prove the collector received it. Once you do this, the collection agency has 30 days to respond to you in writing with a description of the amount you owe and the name and address of the original creditor. If it fails to respond and continues to harass you, you could get an attorney and sue the firm.
Be ready to negotiate
Remember what we said in an earlier paragraph about debts being sold for pennies on the dollar? If the collector can verify your debt and you can’t prove it isn’t yours, you can at least negotiate. If your debt was for $500, you might start by offering $100 to settle it. It’s unlikely that the collector will settle for that amount but it opens the door to paying less than you owe. A third secret of the debt collection industry is that most collectors have a quota. As it gets closer and closer to the end of the month, your collector may be feeling pressure to reach his quota and, thus, more willing to negotiate.
Ask to have the debt removed from your credit reports
If you can dispute the debt or if the collection agency can’t fully verify it, you might offer to pay it off if the collector agrees to have it removed
If you are able to reach a settlement, make sure you get everything in writing. Don’t rely on an oral agreement. Whenever you talk with the debt collector, take good notes about everything that was discussed. Keep all your notes and any correspondence in a file where you could refer to it in the future should there be some disagreement as to who said what or what the two of you agreed to.