3 Strategies For Dealing With Debt Collectors
Do you have a debt collector hassling you, trying to get a payment on some consumer debt that you owe? At best debt collection tactics are annoying – and at the worse can be illegal or predatory.
It is critical knowing how to manage debt collections in order to assert your rights and select the best way of managing your debt. Before making any payments or saying anything:
To avoid making your situation even worse, think before acting:
- Know what your rights are.
- Gather all the facts.
- Having a plan for how you plan on dealing with your debt.
The following is important information on debt collection that you need to be aware of, in addition to strategies for how to handle debt collectors.
Debt collection – what you need to know
Whenever a debt goes unpaid for a certain amount of time – usually beginning 30 days after it is due, it can be reported as being delinquent. Then it gets to the point, which is commonly after 180 days of the debt going unpaid, the creditor – like a medical provider, bank or credit card company – will give up on attempting to collect. Your debt may be sold by them to a third-party debt collector to get some money and least and remove the debt from their books.
You were previously receiving bills from a familiar creditor. Now a different company is sending you debt collection notices. You still owe the debt, however a third party has purchased the right to collect from you.
The Urban Institute issued a 2014 report that showed that around 77 million individuals, or 35% of Americans, have a debt on their credit reports that is in collections.
A debt that is in collections leaves a negative ark on your credit report up to seven years, which it makes it more expensive and harder to get new lines of credit.
How a debt in collections should be handled.
1. Think before acting
Just like you wouldn’t sing a contract before you understood the terms, don’t rush into making a payment whenever you are contacted by a debt collector. Take your time weight what your different options are.
Former debt collector Ramon Khan says that many people are ashamed of their debt, and debt collectors prey on this.
They work to create a sense of urgency and then prey on your pain points in order to convince you to pay them something. Even if you happen to owe $100,000 or $50,000, they don’t actually care whether you pay the whole things. If they are able to get you to pay a portion, it will still count towards the quota they have.
Strategy: On first contact, don’t cave into the pressure.
Even when you make just one payment – even if it is only $5 to $10 – there can be serious repercussion since it acknowledges the debt. For example, when the best is actually past its statute of limitations, if you make a payment it resets the clock and may lead to wage garnishment or a lawsuit.
Don’t provide any payment information that could be used by the collector later, don’t make any promises to pay and don’t pay. Ask for information regarding the debt and then tell them you will call back at a later time to discuss it.
2. Gather all the facts
As your debt gets sold to a third party from the original creditor and then potentially is resold numerous other times, it can be easy to neglect your record keeping. There are often errors in terms of the amount that is owed or even the person who owns many of these sold debts.
Practices of debt collectors are one of the biggest source of consumer complaints that are made with the Consumer Financial Protection Bureau. In 2015 more than 85,000 complains were filed. The main reason was consumers being told to pay debt that they didn’t actually owe.
Strategy: Gather information from your own records and the debt collector.
If you don’t receive a validation letter within the first five business days of the debt collector contacting you, request it. It should include information on who the collection company is, details on your debt, and how the debt can be challenged.
Collect your own records regarding the debt, including your payment history and information about the original creditor.
Keep detailed records on any communication you have with the debt collector as well as any payments that were made previously. For documentation purposes, you should use certified mail.
3. Know What Your Rights Are
Your ally is the Fair Debt Collection Practices Act. The law details what your rights as a consumer are and protects you from predatory collection practices. For example:
Communication: You have the right to request when and how you are contacted by debt collectors – including having them completely cease communication. Debt collectors are not allowed to use threatening violence or profane language.
Honesty: Debt collectors are not allowed to mislead you about the amount of money you owe, who they are, or legal repercussions of failing to pay your debt – for example, threatening to have you arrested.
Challenging the debt: Disputing the debt is another right you have. If you challenge a debt within 30 days of a debt collector first contacting you, that collector can’t ask for any payments until your dispute has been settled. You are still able to challenge the debt after 30 days, however the collector may seek payment during the time the dispute is under investigation.
Additional consumer protections may be offered by your state. Check with your state attorney general office or legal aid within your local area.
If your legal protections have been violated you may want to get a complaint filed with the CFPB.
Strategy: Learn what your consumer rights are – and know how you can use them.
Make sure you understand what your state and federal protections are in regards to the debt collection process. Two informative sources are the Federal Trade Commission and your state’s attorney general.
Whether you demand a debt collector stop contacting you or sending the debt collector a letter to ask for more information about the debt, it is important to know how to best exercise your consumer rights – and not be afraid of doing so.
Once you have taken the time to collect information on your debt and learning what your consumer rights are, the next thing you need to do is compare the various options that are available to you to handle a debt in collection:
- Search for ways that you can pay the debt off.
- Challenge the debt. Read the collector’s validation letter for information on how the debt can be disputed.
- Look into a debt relief solution, like credit counseling.
- If the debts you have are unmanageable and you don’t think you will be able to pay them off in five years, then you might want to look into bankruptcy.
Make an assessment of how your finances would be affected by each of the options, and seek credit counseling or legal advice if you need assistance.