If you’d had a debt sent to a debt collector, be wary. Remember, do not be rushed into payments, know your rights and be sure to validate any debts.
What is a collections account?
When you take out a loan, use federal student loans or apply for a credit card, you agree to pay that money in a timely manner that is set out in advance.
If one of your accounts becomes delinquent and you continuously miss payments, the defaulted account will be assigned to a third-party debt collector. The original creditor will sell off your debt’s full amount for cents on the dollar to collections agencies that will attempt to collect your debt. These agencies will report the collection to the three major credit bureaus and it will show up on your credit report.
These collections can remain on your credit report for up to seven years and will cause your credit score to plummet. However, newer credit models ignore any paid debts that have gone to collections.
A debt collector will typically contact you by phone or by mail asking you to pay the debt. When you pay off these debts, the debt collector keeps a portion of the funds as a fee and gives the rest to the original creditor. In addition, if you write to a debt collector to stop contacting you, they must comply, except for a few exceptions. Continue reading to learn more.
If you’ve had a debt sent to collections, you need to know how to handle collectors.
Many debt collection practices are annoying and are often predatory or illegal. Many debt collection practices act using fear tactics to get you to pay up. Knowing how to handle debt collectors beforehand can help a lot. It will give you time to exercise your rights, manage the debt and take legal action if necessary.
Federal law prohibits debt collectors from threatening you with an arrest or jail time for failure to pay back loans. This idea extends to all types of debt including credit card debt or student loan debt.
Key tips for dealing for debt collectors
Do not give in to pressure
Never rush into paying a debt collector. Think about all your options for paying off debt before proceeding, including the potential for payment plans. Even if you have enough money in your bank account or have access to financial products to help you pay off the collections, wait.
Debt collectors try to create a sense of urgency and prey on a person’s shame about the collection. Remember, the collector does not really care if you pay off the entire debt, if they can get you to pay off a portion, that’s all that matters.
When they contact you, keep a record of all conversations. Never give up any personal or payment information. Do not pay them or make promises to pay them back. Simply ask for information on the debt and say you will discuss it with them later.
Do not make any payments toward the debt, even just a few dollars is an acknowledgment of the debt and can have some serious consequences. This is especially if the debt is past the statute of limitations. Making a payment on debt past this will reset the clock and ensure your liability to the payment.
Gather all information
Debts that are sold to collectors often lack information and recordkeeping. As stated previously, debts are bought by cents on the dollar. When these debts are sold, they are sometimes sold more than once. Record-keeping falls behind and many of these debts have crucial errors, such as the amount owed or who owes it.
Often, people are contacted by debt collectors for debts they do not owe. In fact, debt collection practices make up the largest source of consumer complaints to the Consumer Financial Protection Bureau.
Taking these steps can help you verify the information the collector gives you:
- Request a validation letter from the debt collector. The collector should give you one within the first five days of first contact. The letter should include all details about the debt, information about the collection company and steps you can take to challenge the debt.
- Start gathering your own records about the debt. This should include information about if the debt is yours, who the original creditor is and your payment history.
- Keep detailed records of all communications with the debt collector and of any payments made. Certified mail will give you the best documentation
If the debt collector cannot provide you with accurate and clear information about the debt, it can be disputed and taken off of your credit record. Use this spotty recordkeeping to your advantage. In many instances, there are places that will help you do this.
Know your rights
Know your rights, as outlined by the Fair Debt Collection Practices Act. It outlines consumer rights and will protect you from any predatory tactics. If anything has violated the act, you can file a complaint with the CFPB. Some states offer additional protections from debtors.
These are common tactics that the Fair Debt Collection Practices Act protects you from:
- Honesty
Debt collectors are not legally allowed to mislead you about how much you owe, any legal repercussions or about who they are. This includes threats of arrest or jail time for not repaying a loan.
- Communication
You are allowed to outline how and when you want a debt collector to contact you. This can extend to telling them to stop contacting you altogether. However, it is often smart to leave the line of communication open for negotiations and for more information regarding your debt.
In addition, debt collectors are not allowed to threaten you or use profane or violent language to get you to pay up.
- Challenging the debt
If you want to dispute a collection, do it within the first 30 days of the first contact with the debt collector. When you do this, they cannot ask you for payment until the dispute is settled. If you decide to challenge the debt after the 30-day period, you can still do this, but the collector can still hound you for payment during the investigation.
Wrap-up
Do not be afraid of debt collectors. If you come prepared and understand how to deal with a debt in collections you will be just fine. Remember, gather all information about the debt, know your rights and never jump to pay back the debt.
If you have a debt in collections or inaccuracies on your credit report, we can help. Click here for more information
