Debt collectors. It is two words that can strike dread into any consumer.
Due to worries about clearing the debt and the intimidation tactics often implemented, debt collectors are scary. This is particularly the case if you have never had to deal with this type of situation before. It could cause you to make errors and end up being in an even worse position.
First of all, it is important to accept debt collectors as a necessary evil for the United States’ credit system. You also have to keep in mind that, in certain cases, they can also implement predatory tactics that go beyond legal practices. This is why you cannot go blindly into the whole process; otherwise, you are handing the upper hand to the collection agency.
This is why you need to educate yourself – and that is where this guide comes into play. If you want to know how to deal with debt collectors and ensure they do not take advantage of the situation, read on for all the advice you will need.
Why have debt collectors contacted you?
If a debt collector has been in touch, this is down to two situations. These are:
- A creditor utilizes a debt collection agency, lawyer, or in-house debt collectors. This is done to collect from you a past-due debt.
- A debt collection agency purchases a past-due debt at a discount from a creditor. Due to that investment, they intend to collect the full debt amount from you.
In normal circumstances, the creditor will contact you in the hope of receiving payment. Yet if they feel too much time has passed or no resolution is forthcoming, they will tend to turn to a third-party debt collector for assistance.
However, this situation is often different when it comes to outstanding medical bills. Health care providers are, understandably, not as well-equipped to play the role of the creditor. As a result, they will bring in a third-party collector right from the start.
The Fair Debt Collection Practices Act: understanding your rights
When a debt collector contacts you, your first step is to learn what rights you have. These rights are covered by the Fair Debt Collection Practices Act, which has been in place since 1977. This act was established to protect consumers from debt collectors using abusive practices.
Here is a breakdown of the main ways the Fair Debt Collection Practices Act safeguards you:
Control over communication
Thanks to the FDCPA, you have a level of control over debt collectors’ conduct in terms of communication. For instance, they can only call you at a convenient time or place. They also do not have any rights to discuss your debt with any third parties, such as your family, employer, and neighbors.
If they stick to the guidelines, this means they cannot get in touch with you before 8am or after 9pm. If you ask them not to, a debt collector cannot contact you when at work. You can even request for all contact to be ceased entirely.
Regarding the latter point, just remember that even if contact is completely ceased, the debt does not magically disappear.
Protected against abuse and harassment tactics
A debt collector is prohibited from using harassment or abuse when conducting business. This means they cannot use profane language when talking to you, and they also cannot send any messages that contain any form of threat.
If they do call you about collecting payment, they must identify themselves as debt collectors. Plus, they cannot repeatedly call to harass or annoy you.
Note: debt collector scammers are a real thing. If you are talking to someone that is being overly abusive or aggressive, this could be a sign you are not dealing with a legit collection agency.
Debt collectors have to be honest
Debt collectors do not have the best reputation, but they must remain honest when contacting you about the debt – otherwise, they are violating the FDCPA. Some points that cannot be misrepresented by collectors include:
- The debt amount
- The legal repercussions when the debt is not paid
- Themselves as a different company, authority figure, or professional
- Whether the debt has gone beyond the statute of limitations
Imbalanced practices are prohibited
Along with honest communication, the behavior of debt collectors is further controlled by the FDCPA. Certain unfair practices that are prohibited include:
- Solicit payment via postdated checks
- Deposit a postdated check before your intended payment date. This also includes threatening to deposit it before the date.
- Collect more than the money you owe for the debt. This means they cannot include additional interest and fees.
- Take any property if not allowed. The same also stands if they threaten to take the property.
Collectors must validate your debt
When they are trying to collect any debt from you, debt collectors must prove you actually owe the debt. The process begins with a validation letter that must be sent to you within five days after the initial contact. Oh, and you can also request a verification letter for any additional information – and collectors must provide this for you.
Going back to the validation letter, this needs to include the creditor’s name, how much you owe, and a statement labeling the debt as valid unless you file a dispute within 30 days.
Do you feel your rights have been violated? In this case, you have two main choices:
- File a complaint with the CFPB
- Sue the collection agency
Now that you have a full understanding of the rights you have; it is time to look at the other steps you can take when dealing with debt collectors.
Do not bury your head in the sand
As this previous section noted, debt collectors can send you a validation letter regarding your debt. In this letter, you are given a maximum of 30 days to get in touch with the collector to verify the debt.
If you do not do this, it can lead to serious ramifications. As an example, it can damage your credit report – and this means you could struggle to apply for a mortgage, cheaper car insurance rates, and so on. It may also lead to the debt collector trying to sue you, which will ultimately make the debt an even bigger issue if you lose.
Find a specialist consumer debt attorney
If you do end up being served with a lawsuit notice, this can be an even scarier situation than being notified of the debt in the first place. If you were to lose a court judgment, it could lead to your wages being garnished.
Due to the potential problems, it makes sense to reach out to a specialist consumer debt attorney. Now you might be put off by the thought of having to splash out on sky-high legal bills. However, most law firms will provide a free consultation to learn about where you stand with the debt. If you have a valid case and win, the attorney’s legal fees will generally be covered by the debt collection firm.
When you have an expert fighting your corner, they’ll know everything about your debt lawsuit rights. This means they will understand when a debt collector has utilized unlawful practices, and they ultimately have the ammunition to see the lawsuit fall in your favor.
Keep a record of everything
As mentioned previously, you should receive a letter that features general information about the debt. If you do not receive this letter, ensure you contact the debt collection agency to rectify the problem.
This is only the start of your recordkeeping. When a debt collector phones up, record the conversation. This way, you can prove if they’ve say, used threatening language, or misrepresented the debt. Plus, if you let the collector know they are being recorded, they might be more inclined to stay within the boundaries set out by the FDCPA. Note: a number of states require you have permission from the other party to record any conversations.
If you come to an agreement on the debt, always have this confirmed in writing. Before you even think about sending over any payments, a debt collector representative should sign off the total amount. Say a collector verbally agrees to settle the debt for a reduced amount. Well, as it is not in writing, you might fail to have any legal recourse should the collector attempt to gather the rest of the debt.
Do not give up too much information
Simply put, you do not want to make it easy for the debt collector. If you give out your bank account information, for instance, they can use this to collect the debt. This is particularly problematic if the collector actually turns out to be a scammer – you could end up paying a lot more than the stated debt.
To avoid any premature payments that do not have any proof of payment, go with either a third-party payment service or money order. Avoid using a personal check to cover the debt.
Put on your negotiating hat
You do not want to end up with a lawsuit. You do not want the debt to cripple your credit score. That much is clear. If you do not feel you can contest the debt following a consultation with an attorney, there is one step left to take: pay off the debt.
However, do not simply agree to pay the entire balance in full – not at first anyway. You should propose an amount that is a fraction of the debt the collector is seeking. As with any negotiation, always start low. The total will likely go beyond your initial offer, but it should still sit comfortably below the total debt amount.
This might not seem like it will work, but it is an effective strategy for a number of reasons.
Firstly, some collectors buy your debt from creditors at a significant discount. This means they have room to work with, where they can receive a reduced payment from you while still making a healthy profit. They also want to avoid going through a lengthy process, trying to get the money from you. Even if they feel confident in getting the full amount, they will likely take a smaller lump sum if it meant they avoided having to file a lawsuit.
Just keep in mind this type of negotiation will not work for every situation. For example, say a collector is contacting you about a recent medical debt. They will tend to be a lot less lenient about this than, say, an old debt purchased for pennies by another company that wants to profit by collecting on your debt.