Home Debt How To Deal With Debt Collectors (A Definitive Guide)

How To Deal With Debt Collectors (A Definitive Guide)

by Clifton Hayes
How To Deal With Debt Collectors

Debt collectors are mostly like mosquitoes. They can be troublesome and difficult to dissuade. Luckily, a debt collector can’t do a lot except contacting you and mailing you letters. The Fair Debt Collection Practices Act (FDCPA) sets out the acts that a debt collector may and may not take in the debt collection process.

Your state has additional laws that could further restrict debt collectors. It’s worth investigating these laws, so you understand the rules and know how to deal with debt collectors accordingly.

What Are Debt Collectors?

Debt collectors are collection companies, debt purchasers, and attorneys that collect debts from people like you on a regular basis as part of their business. There are also specialist businesses that purchase past-due debts from creditors and seek to recover them.

The idea that debt collectors frequently employ dubious, if not criminal, techniques is not incorrect. In 2019, the Consumer Financial Protection Bureau (CFPB), which is in charge of financial consumer complaints, dealt with more than 75,000 debt collection complaints.

According to the Consumer Financial Protection Bureau, debt collection is one of the most common and well-known issues of consumer objections to financial products or services.

How Does Debt Collection Work?

Debt stings, no matter how you look at it. It’s easy to lose hope and question whether you’ll ever get ahead when things start stacking up beyond your control. Around this time, an alarm goes off at your local debt collector’s office, signaling that you’re losing hope and that it’s time to start hounding you. They will pursue you. They’ve grown quite adept at frightening you into paying them money, what with daily phone calls, weekly mailings, and many threats.

If you’ve ever been sent to collections, you’ll recognize this story. You’re not the only one who feels this way. Dave understands what it’s like to be pursued by debt collectors. He understands how it feels to lose faith, as well as the humiliation of not being able to buy gas for his Jaguar. Yes, he lost it all… and then some.

That, however, was not the end of his narrative. He also understands what it’s like to punch fear in the face, face debt collectors one by one, and settle his bills until all of his accounts’ numbers turn dark. You can do it, too.

What Debt Collectors Can and Can’t Do

It’s only natural that if you owe money on an old debt, someone would want to know when you’ll be able to pay it. You should, too. However, we both know that debt collectors will use any means necessary to force you to pay.

If you don’t pay a debt collector, what happens? They do have a few legal alternatives available to them. However, there are limitations. That’s why it’s crucial to understand what collectors can and can’t do when it comes to your pocketbook. In reality, under the Fair Debt Collection Practices Act (FDCPA), the Federal Trade Commission has a set of guidelines that protect you against dishonest debt collectors.

What Debt Collectors Can Do

  • Call you directly between the hours of 8 am and 9 pm. However, you have the right to request not to be contacted by phone again in the future. This request must be done in writing. You can also insist that the debt collector only contact your attorney instead.
  • Contact you via mail. However, it can’t be apparent to those looking at your mail that the correspondence is from a debt collector. Postcards are not allowed, as the essence of the correspondence will be apparent.
  • Take you to court. The details are very state-specific, but your creditors can certainly take you to court. For smaller debts, this rarely happens. If you had the money, you’d have already paid it. If you don’t have it, an expensive legal proceeding isn’t worth the effort.
  • Ask for postdated checks. This is permitted under the FDCPA, but may not be permissible under the debt collection laws of your state.
  • Report your payment delinquency to the credit bureaus. Paying your bills on time is an important part of your credit score.
  • Accept less than the full amount as payment in-full. This can be a great option to get the collection agency off your back. The debt may appear to be “settled” on the credit report, which is detrimental to your score. You might also have to pay taxes on the debt amount that has been forgiven.

Debt collectors must comply with the laws of the FDCPA alongside your state of residence. If you owe money, it’s reasonable to expect that your creditor will try to collect that debt. However, there are limitations. Many collection practices are illegal.

What Debt Collectors Can’t Do

  • Call you on a Sunday. Monday through Saturday is a fair game, but even the debt collectors have to take a Sunday break.
  • Call after 9 o’clock or before 8 o’clock. The only way that debt collectors can contact you after these hours is with your consent.
  • Contact your employer. If the debt is due to the non-payment of child support, the employer is out of reach. They can’t get in touch with you at work, either, if they know you don’t want to be concerned about it.
  • Contact your friends, family, or neighbors regarding your debt. They can, however, contact these people to decide your address or telephone number. It can’t be disclosed that you owe any money.
  • Use offensive language on the call. Any obscene language or threat of jail or loss of reputation is not permitted.
  • Call you repeatedly during a short period of time. This is available for interpretation. But if you are regularly getting a call, it can be considered stalking under the FDCPA. In this case, you could sue the debt collector.

This is a short list of things that many debt collectors are found to have abused. Familiarize yourself with the FDCPA for additional limitations. You will then know how to deal with a debt collector. Remember that these rules only apply to debt collectors and not the in-house collection employees of your creditor. See your state laws for additional guidance.

Negotiate With the Debt Collector Using Your Proposed Repayment Plan

Make a note of your agreement. Debt collectors and consumers do not always recall their talks in the same manner. Record the plan and the debt collector’s assurances if you agree to a repayment or settlement plan. Once you’ve made these payments, the collection operations may be halted, and the debt may be terminated or forgiven. Before you make a payment, get it in writing.

Companies who ask money up front to settle your obligations should be avoided. Dealing with debt settlement firms may be dangerous. Some debt settlement firms make promises they can’t keep. Some creditors may refuse to engage with the debt settlement firm you select. In many situations, a debt settlement business will be unable to help you settle your debt.

Contact Your Lenders if You Are at Risk of Missing Payments

Call your lender and explain your circumstances if you fear you could be late on your mortgage, vehicle loan, credit card, student loan, or other debt payments. Issuers like credit card companies and lenders may be able to aid you through hardship programs, often known as “accommodations.” You must contact your lender ahead of time in order to get an accommodation.

These programs may allow you to postpone or modify some payments temporarily. You may be able to avoid paying interest in some situations. If you join before you fall behind on your payments, you may be able to avoid bad credit reports. Longer-term programs, like work-out plans, may be available from your lender. Work-out plans allow you to pay off debt over a specified period of time at a lower interest rate. More information on how to safeguard your credit from the effects of the coronavirus pandemic is now available, including additional details on the CARES Act.

Because of the pandemic, many lenders are experiencing high phone volumes, thus the wait time may be lengthy. Check your lender’s website to see if they have any helpful information, electronic communication options, or online applications for hardship programs or adjustments.

Prepare to explain your financial and work position, as well as how much you can afford to pay based on your income, costs, and assets, when you call your lenders. You might also inquire of them:

  • Do you have any financial assistance programs for those who have lost their jobs as a result of the coronavirus pandemic?
  • What are the financial ramifications of participating in a hardship program?
  • Will I end up owing more money in the long run?
  • Will this have an impact on my credit limit?
  • Will this have an impact on my credit reports?
  • What are my alternatives if I’m still in financial difficulties at the end of the hardship program?

Always check to see if a caller is a real debt collector. Scammers posing as debt collectors have been reported to swindle people.

Learn About the Types of Personal Bankruptcy

Because all bankruptcy laws are governed by federal law, you must file a petition in a federal bankruptcy court. Personal bankruptcy can be divided into two categories:

People with a regular income can maintain their homes under Chapter 13. This bankruptcy plan allows filers to maintain a mortgaged home or automobile that they would otherwise lose if they filed bankruptcy.

Straight bankruptcy is referred to as Chapter 7. It entails liquidating all non-exempt assets under federal and state law.

Credit Reporting

Debt collectors may disclose your debt to credit reporting agencies, which compile credit reports that creditors use to determine whether or not to extend credit to you. Debt collectors, on the other hand, are not allowed to disclose incorrect information regarding your debt. If you dispute a debt with a debt collector in writing, the debt collector is required to inform every credit reporting business to whom your debt has been reported that you dispute the debt.

How to Negotiate a Smaller Payment

Do not pay them any money until you have received a written settlement offer. We say it again: Get it down on paper (on a piece of paper or even recorded in an email). Make a copy of the precise amount you owe them.

They’ll wipe you out if you allow them electronic access to your checking account. They’ll want to draft your account for that amount after you’ve agreed to pay a specific amount. But keep in mind that they are liars. They’ll take more money out of your account than you agreed to and label it a “fee.” If you even try to recover it… well, good luck with that.

They can access your account using the routing and account information on your check, so don’t send a personal check. Send them a money order or cashier’s check for payment; they will not contain your routing and account details. A prepaid debit card might also be sent. Open a new account to pay bills and deposit wages if you’ve previously given a collector access to your checking account. Yes, it’s inconvenient, but it’s preferable than having your salary snatched before you can pay your rent. We can’t emphasize this enough: Don’t have your automatic payroll deposited into a collector’s account.

Rinse and repeat as needed. Utilize the debt snowball to eliminate all of these inactive accounts or obligations. Remember: If you offer them cash at the moment… even if it’s only a little fraction of your overall debt… they’ll settle with you.

Consider Working With a Credit Counselor

Credit counseling companies are often non-profit organizations that may provide you with financial and debt advice. You should be prepared to discuss your financial position, job status, and financial objectives, as well as your regular income and spending, with a credit counselor. Make sure that if you engage with a credit counseling organization, they can assist you in determining how to handle all of your obligations. Many people who are paying a mortgage also go through housing counseling.

Initial budgeting sessions are frequently provided for free by reputable non-profit credit counselors. In the following instances, a non-profit credit counselor may be of assistance.

As part of your initial free budget review, we’ll help you find methods to reduce your spending so you can pay off your debts faster.

Assist you in determining which emergency hardship programs are available to consumers and whether they are appropriate for your financial position. If you have a lot of accounts or are having trouble sorting through your options, this might be useful.

I recommend that you look into a debt management strategy. These programs aim to offer a single monthly payment that the credit counseling organization subsequently distributes to all lenders over a specified time period. This normally entails shutting the majority of your accounts and establishing a fixed repayment schedule, usually at a lower interest rate. Credit counseling companies frequently charge fees for these services, and shutting accounts may have an immediate impact on your credit worthiness, so be sure you understand how the program works before enrolling.

Beware of Scams

Debt collection schemes are one of the most common consumer complaints to the Federal Trade Commission (FTC). Here’s how to avoid falling victim to debt collection scams by recognizing some of the most frequent mistakes.

  • You get a call from a debt collector threatening to jail you unless you make a significant payment right now. 
  • You are asked to pay with a prepaid debit card or a wire transfer by the debt collector.
  • The fictitious debt collector or the fictitious attorney refuses to offer a phone number for verification.
  • The caller becomes agitated or threatening.
  • The caller will not identify the creditor or the amount owed to you.
  • You can’t discover the name of the bogus debt collection agency through a web search, and the fictitious firm has a lot of complaints made against it.
  • You receive a call from a phony auto loan business promising to lower your monthly car payments in order to keep your car from being repossessed.

Verify the Validity of the Agency

Check to see if the call is from a legitimate debt collector. Scammers pose as employees of a collection agency in order to gain access to your personal information. Validation options include:

Request their company name, caller name, company address, phone number, and professional license number before giving any personal information or making a payment.

Look for concerns about the company’s authenticity on Google and read reviews.

Call your creditor to find out which debt collection companies they have authorized to collect on their behalf.

Obtain a copy of your credit report. It will indicate whether or not an account has been filed for collection. This might assist you in determining the legitimacy of the debt caller as well as clarifying the debt.

Stay Organized and Get Everything in Writing

Make sure you understand what you owe and that the creditor, not the debt collector, tells you exactly what you owe right away.

Don’t do anything until you’ve received the first call, either. Within five days of initially contacting you, a collector must also give you a written “validation notice.” The notification must include how much money you owe, who you owe it to, and what you should do if you don’t believe it’s your obligation.

If you don’t believe you owe any money, write to a debt collector and request documentation of the amount. If you write the letter within 30 days of receiving the validation notice, the collector is required to give you documented verification of the debt, such as a copy of a bill you allegedly owe, before it may resume collection efforts.

Disputing a Debt

If a debt collector approaches you about a debt that you do not owe, a debt that is for the wrong amount, a debt that you have already paid, or a debt about which you want further information, it is critical that you react as quickly as possible. If you want to challenge the debt, make sure you react in writing. If you do not, the debt collector may continue to try to collect the amount from you and may even file a lawsuit against you.

Within five days of first contacting you, a debt collector must send you a formal notification, known as a “validation notice,” informing you of (1) the amount it believes you owe, (2) the creditor’s identity, and (3) how to contest the debt in writing. It’s best not to give a debt collector any personal or financial information until you receive this validation notification; otherwise, it might be a fraud.

Dispute the debt in writing within 30 days of the debt collector’s initial contact with you. If you do, the debt collector is required to cease trying to collect the bill until you can provide proof of the debt. If you want to challenge a debt in writing, you should do so:

  • You are not responsible for the debt.
  • You’ve already paid off your loan;
  • You’d want to learn more about the loan; or
  • You want the debt collector to halt or restrict his or her contact with you.

If You Have a Complaint

If you feel a collector is harassing you, such as by phoning too often or at odd hours, or by using threatening or abusive language, inform the collector that you believe what he or she is doing is illegal and that you want them to stop. Inform them that you are recording the timing and language used during the calls and that you may submit a complaint against them.

If you feel a collector has broken the law, you may be able to sue them in court and should seek legal advice. You might be compensated for your losses, and the debt collector could be held accountable for court expenses and lawyers’ fees.

Harassment and Call Restrictions

You cannot be harassed or abused by debt collectors. They are not allowed to swear, threaten you or your property with illegal harm, threaten you with illegal acts, or falsely threaten you with actions they do not plan to conduct. They also can’t contact you repeatedly in a short amount of time to irritate or harass you.

Debt collectors are not allowed to make false or misleading claims. They can’t, for example, lie about the debt they’re attempting to collect or the fact that they’re trying to collect it, and they can’t use phrases or symbols in their communications to you that make them appear to be from an attorney, court, or government agency.

Debt collectors are not permitted to contact you at inconvenient or odd times or locations. They may call between the hours of 8 a.m. and 9 p.m., but you may request that they call at a different time if those hours are difficult for you.

Debt collectors are permitted to send you notifications or letters, but the envelopes must not contain information about your debt or other material designed to embarrass you.

You can ask a debt collector to only contact you by mail or through your attorney, or you can put additional restrictions in place. Make sure your request is in writing, that it is sent certified mail with a return receipt, and that you maintain a copy of the letter and receipt. 

You also have the right to request that a debt collector cease all communication with you. If you do this, the debt collector can only contact you to affirm that it will cease contacting you and to warn you that it may file a lawsuit or take other legal action against you. Remember that even if you urge a debt collector to cease contacting you, the debt collector may still sue you and disclose your debt to credit reporting agencies, damaging your credit.

Understand Your Rights When Dealing With Debt Collectors

There are legitimate debt collectors out there, so make sure you know how to discern the difference between the two. When dealing with debt collectors, you have rights. They must follow the following guidelines:

They have a limited amount of contact. Debt collectors can only contact you between the hours of 8 a.m. and 9 p.m., and they can’t call you at work. You may be dealing with a debt collection fraud if you receive a call outside of these hours.

You have the option of requesting a callback number. A genuine debt collection firm should have no trouble giving you corporate information, including a callback number. If you get it, jot down as much information as you can about the firm, including its name and address. This is necessary to determine whether it is legal to operate in your state.

Final Thoughts

In a perfect world, you wouldn’t have to know how to deal with debt collectors if you made all of your monthly payments. If it’s too late, it’s still vital to understand your rights and how to detect exploitative activities. With these suggestions, you should be able to pay off your debts or, at the very least, have a better grasp of how to deal with debt collectors.

Frequently Asked Questions On How To Deal With Debt Collectors (FAQ)

What Debts Can Go to Collection?

Any unpaid bills may be auctioned or transferred to a debt collection agency.

The following are some of the most typical debts that are referred to collections:

  • Using a credit card
  • Loan for a car
  • Bills from the doctor or the hospital
  • Loans for students
  • Payments on a mortgage

But don’t worry, it won’t come as a shock. (If it is, you may be dealing with a zombie debt situation.) In most situations, you will get a notice informing you that your debt has been placed in collections. However, this does not make it any less terrifying.

Debt collectors may not be able to suit you for old (time-barred) debts, but they may still try to collect them. In California, a lawsuit to recover a debt based on a written agreement must be filed within four years.

How Can Debt Collectors Get My Information?

You might not assume it’s your debt if a firm you’ve never heard of contacts you to collect payment. However, keep in mind that the firm contacting you isn’t always the one with whom you have a debt. Your address or phone number might have come from a variety of sources, including the original creditor, your credit record, or an online search.

If a debt collector obtained your personal information from the original creditor, they will know where you reside, how much money you owe, and whose firm you owe money to. If you’re working with reputable debt collectors, they should have no qualms about providing information about your debt with you.

How to Get Out of Paying Debt Collectors?

I’ll be straight with you: you can’t avoid paying a debt collector. You must repay whatever money you borrowed.

Learning how to bargain with debt collectors is for your emotional and mental well-being, not a free ticket to avoid paying what you owe. You must pay your debts (and we are here to assist you in learning how to halt the harassment until you can do so).

Debt collectors have the right to reject a payment arrangement. They are not required by law to take lesser payments over a longer period of time. Debt collectors must clearly recover the whole amount, therefore they usually go after the full amount. This isn’t to say they won’t collaborate with you.

What Is the Best Way To Negotiate a Settlement With a Debt Collector?

Learn about the debt and make a reasonable proposal before discussing a settlement with a debt collector.

How Long Can You Ignore a Debt Collector?

The statute of limitations is a legislation that establishes a time restriction for debt collectors to prosecute consumers for unpaid debt. The statute of limitations for debt varies by state and kind of obligation, and can last anywhere from three to twenty years.

What Happens if You Ignore a Debt Collector?

If you continue to ignore the debt collector, they will most likely file a lawsuit in court to collect the debt. A debt collector can garnish your income, confiscate your personal property, and remove money from your bank account if a default judgment is issued.

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