Even if you have exemplary credit, you may find yourself dealing with occasional debt collectors. Anything from an oversight that causes you to miss a payment to receiving calls on a loan you’ve cosigned for or a medical bill that your insurance didn’t pay can lead to a call from a debt collector.
The Debt Collection Industry
Consumer debt in the U.S. currently stands at $3.4 trillion and the average household has over $16,000 in outstanding credit card debt. In addition, as many as 35% of households have some form of delinquent debt outstanding. In response, lenders often sell delinquent accounts to debt collection firms at a discount to recover some of that money. In the meantime, debt collectors try to recover as much as possible.
Debt collectors’ tactics and practices have been the focus of laws like the Fair Debt Collection Practice Act and helping consumers know their rights and report unlawful practices have become the mission of agencies like the Consumer Financial Protection Bureau.
How to Handle Debt Collectors
In addition to knowing your rights and knowing where to turn for help, here are some things you can do to make dealing with debt collectors easier and a little less stressful.
Protect Your Personal Information
If a collector calls you and requests that you verify your social security number or birthdate before providing basic information about the account in question, you should request to receive further communication in writing. You want to avoid having a call center employee update someone else’s account with your personal information. Getting the request in writing allows you time to verify that the debt is yours.
Request Documentation of the Original Debt
You have 30 days from the initial contact to dispute any account with a debt collector. When you dispute the debt they will provide you with the details of the original debt as well as the information they have.
Contact the Original Creditor
Verify what collection agency they have placed your account with. Sometimes you might get calls from more than one company attempting to collect the same account. For example, if you have a credit card account that has been charged-off and you’re receiving collection activity from multiple companies, call the number on the back of your card and ask for the department that handles delinquent accounts. They will give you a contact number for the right collection agency or they may work directly with you to settle your delinquent balance.
Make Payment Arrangements Wisely
Even if you are sure that the debt is yours, neither agree nor refuse to pay during the initial contact. A popular tactic among debt collectors is to offer a 25%-40% discounted settlement with a one-time credit card payment over the phone. Others will offer payment plans with automatic debits from your checking account or pre-authorized charges to your debit or credit card. If you agree to make payments to a collection agency, you’ll want to get a statement before you make the first payment. To set up an automatic payment, use the bill pay features offered by your bank. That way your control the payments and can change or stop them at any time.
What to Watch Out for When Dealing With Collection Agencies
Collection agencies also sell aged and uncollected debts to other collection agencies. If you agree to let a debt collector set up automatic payments, don’t assume that they’ll automatically stop your payments if your account is sold. You might get calls and letters from another debt collector trying to collect the full balance on the account that you’ve already partially paid.
You might be dealing with a call center that is acting on behalf of a debt collection agency. Call center employees often have directives and receive incentives for obtaining immediate payments. Often, they don’t have the time or access to further account details to fully verify the status of your debt.
Debt collectors also report information to the credit bureaus. So, you’ll not only have a derogatory item from the original creditor, but each agency that touches your account can also place an item on your credit report. Multiple collection items will cause your credit score to suffer, even if it’s for the same original account.
Take Control Over Your Debts
The best way to handle debt collectors is to get a handle over any delinquent debts you owe. If you’re having trouble paying your bills on time, get help from a local consumer credit counseling agency or bankruptcy attorney to learn about options for debt relief.
If you feel you’ve been harassed by a debt collector or a collection agency has made unauthorized charges to your credit card or withdrawals from your bank account, make a complaint with your state attorney general or the Consumer Financial Protection Bureau.
In the case of repeated violations, contact a local attorney to find out if you have a legal claim against a debt collection agency. Any of these resources can help you to regain your peace of mind, correct your credit report, and recover any monies due to you for overpayments.