According to a study by the Urban Institute, approximately 71 million Americans have some kind of debt in collections status. That’s over one-third of the U.S. population. What that indicates is that debt in America is big business, and debt collection agents are not going away anytime soon. Having to deal with debt collections is extremely stressful and can disrupt every aspect of life. When you are genuinely experiencing financial hardship, this kind of harassment only compounds the stress. If you’ve found yourself in this position, don’t despair. There are effective ways to deal with debt collectors when you’re unable to pay which will allow you to take back control of your time –– and peace of mind.
Dealing With Debt Collectors
The debt collection process starts if/when you fall behind and become past due on any virtually any bill; medical, auto loan, mobile phone, etc. If there hasn’t been any payment activity on the account (typically this occurs after three months), the debt will often be sent to collections in an attempt to get their money. Debt is big business in America, and very often creditors will simply sell off unpaid debt to collection agencies for a fraction of what is owed, or they may hire an agency to do the dirty work of harassing you into paying.
Debt collection agencies have a singular purpose of recovering as much unpaid debt as possible, and often they will resort to unscrupulous tactics to achieve that goal.
If you’re being subjected to aggressive debt collection tactics, read on to learn how to take control of the situation, negotiate with collection agencies, and recover your peace of mind.
Start With Your Priorities –– First
If you’re experiencing financial hardship, and simply trying to make your money last until the end of the month, you’re likely to already be under an extreme amount of duress. When a collection agency is pressuring you to send them money you already don’t have to spare, it exacerbates an already delicate mindset. If that is your circumstance, in no way should you allow yourself to be bullied into sending money that could make a bad situation worse.
With a clear mindset, make sure you have your basic priorities accounted for. This means you are able to financially cover the cost of (1) food, (2) utilities, (3) housing, and (4) transportation. Then and only then can you consider what amount is left over for debt repayment, whether it’s $5 or $50. Debt collectors will try to convince you that they need to be your financial priority. Don’t buy it.
When it comes to debt repayment, it’s important to first know your rights. A good starting point is to understand what collection agencies can and cannot do, by reviewing the Fair Debt Collection Practices Act. Secondly, you’ll want to have a crystal clear understanding of how much money you owe (and to whom) when debt collectors are contacting you. Lastly, make sure you understand that you can negotiate on –– and often settle for less than you owe –– your debt.
Virtually any account that has not been paid on for a period of time (typically three months) can be sold to or assigned to a debt collector Some of the most common are credit cards, automobile loans, medical bills, student loans, and mortgage payments.
Understanding Debt Collection Agency Rights
Debt collection agencies are legitimate businesses that legally have the right to collect on a debt. It’s when those methods of collection become unscrupulous, that it’s important to know what they legally can and cannot do. If you’re being contacted by a debt collection agency and feel that you’re being harassed, knowledge is key.
What Debt Collection Agencies Can Legally Do
- Contact you using any means available, between 8 a.m. and 9 p.m.
- Communicate with your spouse or other family members, in attempting to reach you.
- Sue for payment.
- Try to convince you to pay old debts that have passed the statute of limitations.
- Charge interest.
What Debt Collection Agencies Cannot Legally Do
- Lie to you, attempt to hide who they are, or lie about how much debt you owe.
- Continue to call, text, email, and/or send letters if you have requested that they cease doing so, via a certified letter.
- Communicate to anyone else more than one time about your debt in attempts to shame you.
- Garnish your wages without first taking you to court (student loans or an IRS debt, excepted).
- Harass you or threaten you with foul language or threaten jail.
If you are on the receiving end of a debt collector that continues to act in ways that harass, lie or threaten you, you should immediately report them to the Federal Trade Commission, and consider hiring an attorney to send a certified letter requesting that they stop contacting you.
Learn How to Negotiate With Debt Collectors
Although debt collection agencies do not have any legal requirement to negotiate or accept less than the full amount owed, the truth is they often will work with consumers and settle for less than the full debt amount. A debt collection agency wants to clear those accounts off their books as quickly as possible and remember if they bought the debt, they likely only a fraction of what the total amount of debt was, so you’ll likely have room to negotiate. In doing so, remember a few things: (1) Don’t pay any money until you’ve agreed upon a settlement offer and received the offer in writing. Keep this document, (2) Don’t give electronic access to your bank account, and to take it a step further, don’t send payment by personal check, rather pay by money order, cashier’s check, or send a prepaid debit card. You want to avoid allowing access to your money to a debt collector, other than the exact payment that you agreed upon.
Protect Yourself from Scammers Posing as Debt Collectors
Unfortunately for legitimate businesses, and especially for vulnerable consumers, the debt collection industry attracts a dark element; that is scammers who will either steal your identity or your money –– or both. If you’re being contacted by a debt collector, make absolutely sure you know who it is you’re talking to. Ask for the caller to provide you their name, phone number, and address. Don’t provide any financial details or information over the phone, until you’ve verified that the caller is legitimate. If you’re unfamiliar with the debt being described, ask to be provided written documentation including the account number(s) and details.
If you believe a scammer has contacted you, immediately report them to the Federal Trade Commission. Follow up with the original creditor of the debt and inquire as to what companies they’ve contracted with to collect the debt.
Dealing with debt is certainly no fun. It’s even worse if you’re struggling financially and being hounded by debt collectors. Most debt collection agencies will do everything in their legal right to collect on the debt, which unfortunately can be incredibly stressful to the consumer. There is a way to reclaim your peace of mind though. Make sure you’re aware of your rights and what collection agencies can and cannot do. Deal with them in a matter-of-fact, upfront manner, and eventually, you’ll get yourself back on track financially.