Dealing with Collectors

Dealing with debt collection agencies

When a person doesn’t pay a bill on time, the lender or creditor can designate your account as a bad debt and send it to a collection agency in an attempt to collect the balance owed. Creditors aren't obligated to wait a certain period of time before turning an account over to collections, but most do so after an account is three to four months past due and they believe they can't collect it.

A collection agency obtains or arranges for payment of money owed to a third party, either a person or a company. When an account is turned over for collection, the collection agency notifies the account holder by mail that the collection agency is now responsible for the collection of that account balance.

How do I deal with collection agencies?

Don’t panic if you've been notified in writing that an account has been turned over to a collection agency. The agency just wants to collect the money you owe its client.
What should I do?

• If possible, pay the money you owe
  If you are in a disastrous financial state, explain your situation and tell the collector that you simply cannot pay the bill now. If, on the other hand, you can pay a portion, or all, of the bill, you should. An unpaid collection account that shows on your credit report is very serious and will negatively affect your credit rating. The sooner you can pay it off, the better your credit record will be.
• If it's impossible for you to pay the full amount at once, negotiate with the debt collection agency.
  Once a debt goes to collections, it may be possible to negotiate a deal to pay less than the full amount. Debt collection agencies will try to collect the entire amount you owe at first, but after several unsuccessful attempts, they will usually settle for something less. Offer some other method of repayment, either in a lump-sum or a series of reduced monthly payments. Make sure you know what you can afford to pay before agreeing to any new payment arrangements. Follow up the telephone conversation in writing and, if you can, enclose a good-faith payment.
• Don't make promises you can't keep -- and keep the ones you make.
  Don't let anyone pressure you into making a payment you can't afford. Nobody wins if you agree to payments you won’t be able to make. If you’re not sure you can make a certain payment amount, ask for time to think about an offer from an agency. Once you agree to a specific payment amount and schedule, fulfill your obligation.
• Keep good records.
  Keep copies of all correspondence, both written and verbal. Make copies of any letters you send to the collection agency. Keep a written record of telephone calls, including the name of the person with whom you spoke, the date/time of the conversation, and the terms of the agreement. These records will be very helpful later if disagreements or misunderstandings occur between you and the collection agency.
• Never send cash.
  Always make payments in such a way that you have a receipt -- either a canceled check from your own bank or a receipt from the agency.
• Work with the collection agency, not the original creditor.
  After an account has been officially turned over to a collection agency, deal only with that agency when making arrangements for payment. Don't contact the original creditor—the creditor may no longer have your account information available and it just creates confusion unless there's an error in the account. In the case of an error, however, advise both the original creditor and the collection agency.
• Avoiding collections.
  Collection accounts are considered very negative and can hurt your credit score for years to come. Your best strategy is to avoid having accounts placed with a collection agency at all. If you can’t pay a bill, call the creditor immediately to request a reduced payment schedule. If you find you have difficulty paying your bills each month, work with a nonprofit counseling agency that will negotiate with your creditors for you. Take the initiative to ask for help, even if it is embarrassing or difficult for you. If your creditors don’t hear from you, you may hear from a collection agency instead!

What the collection agency can do:

When your debt is turned over to an outside collection agency, you can expect assertive attempts to get your attention. The collector's methods will include letters and phone calls with suggestions on how you can pay the debt.

How do I stop harassment from the collection agency?

The easiest way to stop collectors from harassing you is to write a letter requesting that they stop attempting to contact you. This is called a “cease” letter. Keep a copy of the letter for reference.

Under the Fair Debt Collection Practices Act, once you notify the collection agency IN WRITING that you want it to cease further communication with you, the collection agency cannot correspond with you further except:

• to notify you that it is stopping its effort to collect the debt; or
• to notify you that the collection agency intends to take action, such as bringing a lawsuit against you.

This federal law, however, does not apply to creditors who are collecting their own debts.

This law applies whether you owe the debt or not. If you decide to write such a letter to a collection agency, be sure it includes:

• your name and address and, if available, the account number on the statement received from the collection agency;
• the date;
• a statement that you are exercising your rights under the Fair Debt Collection Practices Act; and
• a statement that you want the collection agency to stop calling or writing you, or both.

This WILL NOT make your debt disappear; it will only terminate the harassment. Collection efforts can continue through use of legal measures.

Your Rights with Collection Agencies

A federal law called the Fair Debt Collection Practices Act was created by the Federal Trade Commission (FTC) to protect consumers. Many people don’t realize this law exists. This law applies only to third party collection agencies and not to the original creditor to which you owe the debt. A brief summary of the FTC law follows:

• You may stop a collector from contacting you by writing them return receipt mail, and telling them to stop. Once the agency receives your letter, they may not contact you again except to say there will be no further contact or to advise you of any legal action taken against you.
• Debt collection agencies may NOT contact you outside the hours of 8:00 AM and 9:00 PM.
• Debt collection agencies may NOT contact you at unreasonable places.
• Debt collection agencies may NOT contact you at work if you have told them that your employer does not approve of the contact.
• Debt collection agencies may NOT misrepresent themselves as agents of the government, attorneys, or as employees of credit bureaus. Collection representatives can't use false names either, although many do.
• Debt collection agencies may NOT make false statements. For example, they may not imply that you have committed a crime. They can't say that you'll go to prison, they can't lie about the status of legal documents they are sending you, and they can't say they'll garnish your wages.
• Debt collection agencies may NOT contact other people about you except to find out where you live or work. They cannot reveal how much debt you owe to other people or publish a list of people who have bad debt. They cannot slander your reputation.
• Debt collection agencies may NOT verbally abuse you, threaten your life, or use profanity.
• Debt collection agencies may NOT cause your telephone to ring and ring, or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.

Where to report a debt collector for an alleged violation

Report violations from a debt collector to your state Attorney General's office and the Federal Trade Commission. States may have their own debt collection laws and your Attorney General’s office can help you determine your rights.