The debt buying industry is not going anywhere anytime soon. You may not even have any outstanding debt; yet a debt collector will purchase an outdated debt, sometimes 15 to 20 years old and pursue you for payment.
Many debt collectors will engage in unethical tactics to collect debts. The best approach in dealing with a debt collector is to stay calm, stay off the phone and know your rights. Below are a variety of tips that will empower you when dealing with debt collectors:
1. Fair Debt Collection Practices Act
Collection agencies are regulated by the Fair Debt Collection Practices Act (FDCPA). This Act puts regulations and limits on how a collection agency, debt collector or debt collection law firm may conduct itself when dealing with a debtor. The FDCPA promotes and protects the fair treatment of consumers by prohibiting debt collectors from using unfair, deceptive, or abusive practices.
2. Federal Trade Commission
The Federal Trade Commission (FTC) enforces the Fair Debt Collection Practices Act which applies to professional debt collectors who collect debts they did not originate. This includes debt collection law firms as well. Technically the FDCPA does not apply to original creditors such as banks, department stores, and other lenders who collect their own debts; however, no reputable lender is permitted to conduct themselves unprofessionally when dealing with consumers.
3. Know your rights
A collection agency cannot harass or humiliate debtors, talk to your relatives, employers, co-workers or neighbors about your debt. It is illegal for debt collectors to threaten violence or harm to you. Debt collectors are prohibited from using obscene language and harassing you in any way. Harassment would include multiple and repeated telephone calls in one day.
4. Debt Collectors who threaten a Lawsuit
Debt collectors are not allowed to threaten a lawsuit they never intend on filing; and, they are not supposed to act as though a lawsuit is already filed against you if it has not actually been filed. Under no circumstance can a debt collector threaten arrest. They cannot seize your property or garnish your wages unless win a judgment against you in a legal proceeding.
5. Respond promptly to collection agencies
Do not avoid calls and correspondence from collection agencies. Ignoring phone calls and correspondence may result in a lawsuit being filed against you if your debt is still within the Statute of Limitations. Your first and only telephone call should include the following:
- Request the name of the representative calling you, their telephone number and the address of the collection agency.
- Request the name of the original creditor, the amount the collector claims you owe and when the account was placed for collection.
- Do not agree to pay anything for the debt over the telephone.
- Let them know any further response will be through U.S. Mail only as telephone communication is inconvenient for you.
The debt collector must perform certain duties once they have been successful in talking to you over the telephone. The FDCPA says:
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector
in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector
will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
6. Stop the Calls and Request Written Communication only
Stop the annoying collection agency calls with a simple written letter requesting no further contact over the telephone. Let the collection agency know they may communicate via U.S. mail as telephone calls are inconvenient for you. Make sure you send the letter via US Certified Mail with a Return Receipt as your proof. Be aware that original creditors are not covered under the FDCPA, only collection agencies. You cannot request mail only contact from original creditors.
7. Use a Payphone if you must call
If you call a collection agency and dial *67 to block caller id you may be wasting your time because commercial (800) numbers utilize ANI (Automatic Number Identification) which overrides the *67 Block. If you prefer a debt collector not have access to your telephone number, use a pay phone if you must call.
8. Create a paper trail
Detail your correspondence with the collection agency. Start by creating a file with the name and address of the collection agency, a contact person and telephone number. Keep all correspondence you send or receive along with the envelopes. All correspondence you send should be sent certified, return receipt and keep the green cards the post office mails back to you.
9. Never disclose your financial information
When paying a debt with a collection agency make sure you do not use a personal check, debit card or credit card. Use only money orders or cashier’s checks, preferably not from your banking institution. Collection agencies have been known to put unauthorized charges on your debit or credit card and also put through ACH withdrawals from your checking account. Keep your financial information private.
10. Review the amount owed
Most often when a debt reaches a collection agency the original creditor has already written the amount owed off as a “bad debt”. The collection agency purchases bad debt for pennies on the dollar, literally pennies on the dollar (as low as 0.2 cents in some instances).
Additionally, they tack on fees, costs and interests supposedly associated with collecting the debt. The FDCPA prohibits a debt collector from assessing any fees or charges which are not specifically permitted by the laws of your state, or contained in the terms of your original agreement with the creditor. These debts can be settled for pennies on the dollar, especially if the collection is older.
11. Review the Statute of Limitations
Check your State’s statute of limitations as the debt may be uncollectible. Your State’s statute of limitations governs the amount of time a creditor or collection agency can sue you for a debt. After the statute of limitations has expired, the original creditor or the collection agency cannot sue you for the debt.
This does not mean a creditor or debt collector is prohibited from attempting to collect the debt. It just means you cannot be sued or taken to court after the statute of limitations has expired. Be very careful with old debt as an expired statute of limitations in some states can be restarted by making any amount of payment on an old debt, entering into an agreement plan to repay the debt or even acknowledging you owe the debt.
12. Request debt validation
According to the FDCPA you have the right to request a collection agency validate the debt they are trying to collect. Essentially, the collection agency must show that you owe the “original creditor” the debt, not the “collection agency” attempting to collect the debt. How do you know the debt is yours.
Even if it is your debt do you really owe the collection agency who purchased the bad debt? Debt validation forces debt collectors to prove you owe them. Many collection agencies purchase bad debts without any supporting documentation from the original creditor. A collection agency may only have basic information about you and an account number. If they cannot provide proof you owe the debt they cannot legally make you pay the debt.
13. Dispute the Debt
Dispute the debt with the credit reporting agencies based upon a factual error. You can learn more about disputing a collection account here. If you have requested debt validation and the debt collector cannot validate, dispute the debt and request the credit reporting agencies remove the unvalidated debt from your credit reports.
14. Consider Debt Settlement
If you do decide to settle an old debt proceed with caution and try to settle the debt with the original creditor in exchange for the debt reported “paid as agreed”. Having the debt reported as “settled” can hurt your credit score. If settling the account with the collection agency aim for a full deletion of the account in exchange for payment. In all of your negotiations, never acknowledge that the debt is yours and get everything in writing.
15. Avoid Paying a Debt Collector the Full Amount
Because most debt collectors are not working directly for the original creditor, they are debt buyers. Debt buyers purchase charged-off, often uncollectible out of statute of limitations debts for pennies on the dollar. They may make you think they are connected with the original creditor but do not believe it.
The debt collector has one goal, get the most money out of you for the least amount of effort. That’s why many debt collectors will NEVER send you anything in writing. They want to deal with you over the telephone only, hoping to break you down and get you to agree to payment with your bank or credit card information being debited automatically.
Now that you know they paid pennies on the dollar, if you are thinking of debt settlement, start your offer low, no more than .25 cents on the dollar. Anything they get above the .02 to .03 cent they probably paid for the debt is profit for them. But keep in mind before reaching an agreement, a settled debt is no better than an unsettled debt on your credit report, it’s still negative information unless you negotiate a full deletion from your credit reports.
16. Watch out for Zombie Debt
Zombie debt may include past debts that you owe, discharged debt, debt included in bankruptcy, debt you may have never owed and even debts incurred due to identity theft. Zombie debt involves collection agencies purchasing debts for pennies on the dollar that original creditors have long since written off as bad debt.
17. Get a Deletion from your credit reports
If you pay a collection or settle a debt make sure you obtain a “deletion” and not a “paid collection” entry. This also applies to paying a debt directly to the creditor. Your creditors have the power to delete entries they put on your credit file. Never let them tell you they don’t. Just like they put it on, they can take it off. Some collection agencies even charge a “deletion fee” but it is well worth the cost. A paid collection and an unpaid collection hold the same negative weight.
Your credit score will not improve once you pay a collection, especially if that collection is recent. When you negotiate a deletion ALWAYS get it in writing BEFORE you pay the debt. This is your proof and once you have a deletion letter you may submit a request for the item to be removed from your credit report directly to the credit bureaus by faxing or mailing that letter. See Deletions and Sample Letter.
18. Submit Complaints
There is help when you cannot resolve an issue with debt collectors. The Consumer Financial Protection Bureau helps consumers resolve complaints. The CFPB will forward your complaint and any documents you provide to the company and work to get a response from them. If the CFPB feels another agency can better address your needs they will forward your complaint to them and let you know. The debt collector has 15 days to respond to the CFPB and you once a complaint is submitted. Submit a complaint here.
There are many consumer laws on your side in repairing your credit. Knowing your rights will greatly increase your efforts in repairing your credit. If you do not have the free time to research your rights, Let a Law Firm Remove your Negative Items from your Credit Report!