Dealing with Debt Collectors
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As the credit crunch bites harder, more and more people will find themselves falling behind with their monthly payments. Credit card and loan companies will put the pressure on you, but if they feel they are getting nowhere they will pass your debt on to a collection agency. A more recent innovation has been to sell debt. The original creditor sells your outstanding debt to a collection agency. In essence they take on your debt. They then try to get it back. Remember that the interest rate is still ticking and collection and other charges are still accruing. This makes it a very attractive proposition to get the money back from you. Some companies resort to bully boy tactics to get their money. When collection agents confront you, it pays to know your rights.
You Will Need:
- A telephone.
- Writing Paper.
- A tape recorder.
- Possibly your lawyer.
- Yellow Pages.
- A box file.
Step 1
A collection agent is calling you up concerning unmet payments.They will want to secure payment via your checking account and they want you to give this information over the telephone. Don’t give them any information. Instead you need to know your rights. These vary from State to State. Call up your State Attorney Generals Office. It will be listed in the telephone directory. Explain your situation and ask them three questions:
- Is garnishment of earnings legal in your state?
- Is property seizure legal in your state?
- Is recording of telephone conversations legal in your state? Now you have the information you need.
Step 2
When they next call. Tell them you are going to record the conversation (providing you live in one of the 35 states where it is legal) If they ignore you and continue talking, this is considered to be acquiescence and will do as permission regarding the remaining 15. This will insure the agent is polite and less cajoling. You have a right to cut the call and a definite right if it comes before 8am and after 9pm.
Step 3
Send them “a cease and desist letter”. This must include your name and address and account number for the unpaid debt. Request the agency stops contacting you about the debt. Send the letter by certified post. Put a copy of the letter in your file along with the receipt of posting. Sending such a letter does not cancel the debt, but it will buy you some time. Certainly it will cause a change in tactics on the part of the creditor and or collection agents.
Step 4
Now you have established a stronger position. You know your rights and are no longer judged to be an easy target. This is a good place to negotiate from. When they next contact you, if they do! You can offer to settle the debt, but not for the full amount. Creditors give collection agents leeway in these matters, so offer to settle for 50% of the outstanding sum. You can haggle a bit and finally agree on 60%. Leave all deals like this for late in the month. Collection agencies receive their commissions at the end of the month and are more likely to be more generous when they can see some anticipated earning about to be realized.
Step 5
Once you have agreed on an amount and a method of repayment. Get the agent to give you agreement in writing. Be sure to stipulate that the debt will be marked as paid with the credit agencies and have that confirmed in your written agreement. By facilitating this debt reduction you have made a substantial saving. The difference is taxable. However, the agency is not required to inform the IRS if the amount is less than $600. Make sure they understand this.
Step 6
Get the original creditor to sign off on the agreement you have just made with the collection agency. You don’t want them to be chasing you for the remainder at some unstipulated time in the future.
Step 7
Make all payments by check. Checks are more easily traced than other payment methods and provide a verifiable method of payment. However, also ask for a receipt. File all of this, including details of your check in case of any unlikely trouble in the future.
Step 8
If the agency continues to be intractable, file a complaint with the FTC. More than 17% of complaints the FTC receives concern the tactics of the collection agencies, so you will be in good company. In the worst possible scenario threaten to sue them. You will need evidence to support your claim, but you have kept records of everything we have discussed and you have recorded the phone calls, so this will give your lawyer a lot of evidence to play with.
Tip:
Know your rights and don’t be intimidated. This might make them go away completely without any need to settle at all. Good luck!
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