Receiving the first call from a debt collection agency can be unsettling and just the tip of the iceberg in a long row of stressful situations. Debt collectors are known for working on the border of law or even crossing it a few times to get their commissions. Yet, even if you are aware that you have missed a few payments, you should not panic since there are plenty of ways to deal with this problem in a civilized way. It is all about remaining calm, knowing that law is on your side and treating the situation as a business negotiation.
There are two main types of debt collectors. There are the collectors from your original creditor and third-party collectors. Your primary lender allows you between three to six months to pay your debt after which the debt is sold to another company, or the contract is passed on to a specialized collector.
If you have not exceeded your initial term and are still talking to the original creditor, you might be able to get a better agreement, negotiate payment terms and even make sure your delinquency does not affect your credit score. If the debt has been sold, these steps will be more challenging, especially when it comes not to damage your FICO score.
Golden Rules of Dealing with Debt Collectors
Debt collectors are trained to be “cool, calm and collected.” This is exactly how you should play this game and don’t give in to any of their emotional pressure.
1. Know your rights
The Fair Debt Collection Practices Act (FDCPA) governs what is permitted and what is forbidden when dealing with overdue payments. This bill regulates the interactions and states that:
- The collector can’t contact you before 8 AM and 9 PM without your permission.
- They are legally obliged to stop contact after you have requested so in writing. Be sure to use certified mail with a return receipt to have evidence that you did so. In this case, they can only contact you to let you know they are ceasing pursuit or that you will have to face them in court.
- They are not allowed to contact anyone else except you or your attorney regarding the debt. Contacting friends and family is permitted once, to find out details about your address or phone number.
- They are obliged to issue a validation notice in writing. Don’t pay anything until you have this.
- Using harassment, profanity language or threats is strictly forbidden, and the collector who is doing so should be sued.
- They are not allowed to state legal action or wage garnishing unless they already filed the Otherwise, it is a threat, and it is not allowed.
2. Communicate only in writing
There are numerous situations when debt collection turns into legal action, either from the incriminated person or the collector. It is best to be prepared for this case and have the paperwork ready to show that you were being open and honest. Official documents and letters through the certified mail are certain pieces of evidence and are accepted in a trial.
3. Record the conversations
Depending on your residency you can secretly record the conversation. However, it is best to inform the agent calling you that you intend to tape it and continuing the discussion means that they accept it. Most of the times they are instructed not to do so and they will hang-up.
4. Check the collector’s identity
Debt collection gives ideas to a lot of scammers. They can act as real agents and pretend money by intimidation. Most legitimate companies can still use emotional techniques, but being extremely pushy and frightening is a red flag. Ask them to provide a lot of details about the organization they represent, their name, function, contact, and your debt. After you have written down and recorded the conversation ask them to provide you with the same information in writing and not to communicate with you until the letter has arrived. Refuse any further contact if the agent is not able or willing to disclose all the information required.
5. Do not reveal any personal details
Since most debt collectors will try to get many personal details that they can use against you, be distant and secretive. Adopt the “broken record technique.” Say the same thing over and over again. If you know you have debt and could be contacted by an agent take some caution measures and protect all personal information. Be most secretive about social media accounts and only share information with friends and family. You wouldn’t want your debt collector to know you just returned from a cruise on a tropical island and then pretend you can’t afford to pay the debt.
6. Validate debt
Before paying any cent, make sure that the debt is yours, the amount is right (including penalties), and the collector has not added any fees since they are not entitled to do so. Debt can represent mortgage payments, credit card or utility bills. Ask the agent to provide you with a detailed document including the data of the original creditor if they are third-party.
7. Don’t get new debt
It might be tempting to get a new credit card of max out an existing one to pay this, but this could hurt your credit score even more. A good rule of thumb is to take care of your youngest debt first without accumulating new one.
8. Don’t allow the debt collector to intimidate you
Even if you have debt, this is not a felony. You will not go to jail, there is a very slight chance they will sue you and that the lawsuit will end with a wage garnishment. Even if they take legal action, this means time and involves resources which are not always justified by the amount of debt. So, most likely they won’t do more than call or write to you, once you have taken the previously described steps.
If the debt collector threatens you in any way, just politely remind them that they are breaking the law and that you ask them to put in writing all the things they intended to say.
9. Sue them if you are threatened of harassed
If you have gathered enough evidence that a debt collection company if harassing you or threatening you, the best option is to file a lawsuit against them. Be sure to have copies of the letters you sent them, recordings of the conversations and e-mails.
If you are convinced the debt is yours, is correct and is too young to be overseen, start bargaining like in the Grand Bazaar of Istanbul. Offer to pay as little as 10% or 20% of the debt and get the rest on a schedule for the next six months at least. Go back and forth with the collector until you strike an agreement. At that moment have them send you the offer in writing for you to accept it. Never settle for a verbal deal.
You can even go a step further and negotiate with them to pay a little more for the debt to be deleted from the reports sent to the credit bureaus.
Having debt and dealing with collector agents is not pleasant, but should not feel scary either. While some people even committed suicide due to giving in to the pressure they experienced from debt collection agencies, this is under no circumstances the way to go. The only solution is to remain calm, behave in a civilized way, ask for papers and buy yourself time to react.
If you intend to keep your credit score up for a future mortgage or leasing try to negotiate with the agent and create a repayment schedule together. If you have already made your substantial purchases (car, home) and don’t value much your credit score, wait for the debt to come of age (7-10 years) and be removed.