Debt Collector Tips

What is a debt collector? According the the Fair Debt Collection Practices Act (FDCPA) a debt collector is:

The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. ... The term does not include any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor.

When you fall behind on your payments, your creditor collections department will usually try to call you at home or work to find out why your payments are late. You'll also see a notice of late payments on your monthly statements and may receive past-due letters in the mail. Your creditor may also transfer your account to a third-party to try to collect the late payments; third-party debt collects receive a fee or a percentage of the debt collected. If your creditor is unable to successfully collect the debt after six-months, your account may be charged-off and bundled with other charged-off consumer accounts and sold, in auction style, to a third-party, a debt buyer. Debt buyers purchase your account for pennies on the dollar and will attempt to recover the full amount. At first, the debt buyer will demand 100% of the payment due. Later on, debt buyers will offer you a settlement ranging from 20% to 50% off the past-due balance. The good news, the Federal Trade Commission (FTC) has created a pamphlet that outlines the Fair Debt Collection Practices Act (FDCPA), a guideline for debt collectors.

• On your initial contact with a debt collector, send the debt collector a written request to verify the debt. Usually, the request must be sent to the debt collector within 30-days of initial written communication from the debt collector.

• Before agreeing to pay-off the debt, payment plans and/or settlement plans, check to see if the statute of limitations has expired for the debt.  If you except new credit from your creditor or make payments on your account, you may reset the statute of limitations.  After the statute of limitations has expired, no civil lawsuit may be filed against you; if so, you can claim the absolute defense of statute of limitations. Also, most past-due unpaid debts remain on your credit report seven (7) years after your account became past due; after the seven years, the past due account falls off your credit report. Hence, when the statute of limitations has expired and the past due account falls off your credit report, the only obligation to your creditor or debt buyer is a moral obligation to pay-off your debt. You can stop a debt collector from contacting you by writing the debt collect a letter telling them to stop contacting you at work and home.

• A debt collector is a professional negotiator. They're more interested in if your employed and if can you make a payment today. Debt collectors are trained to get you to make a payment today; they're not your friend and really don't care about the circumstances surrounding your financial distress. If you cannot make the payment, just be straight-forward and tell the debt collector that you cannot pay today, or tomorrow, or the next day or the end of month; unless you win the lottery.

• Many states have their own debt collection laws. Contact your state's attorney general.

• Prioritize your bills. Fold a sheet of paper in half. On one side list all your monthly bills (rent, mortgage, electric, gas, water, car payments, car insurance, gasoline, lunch, groceries, cable, cell phone bill, misc) and on the other side list your wages. Add up your wages and then add up your bills. Are you paying more in bills than in wages? Finally, start numbering your bills from 1 to n where 1 is the highest priority: your rent/mortgage will probably be numbered 1, followed by your electric bill and so on. Prioritizing your bills will help you decide if you can make payments toward your past due bill. Do not agree on payments that you cannot afford. Also, do not send the debt collector post-dated checks or agree to have the payments electronically taken out of your checking or savings accounts.

• Again, don't tell the debt collector your financial story; remember, a debt collector's job is to collect debts, to get you to pay your debt today or within the next three to six months. Usually, a debt collector's compensation is based on the amount of debts collected; listening to your financial story may be perceived as eating away at the debt collectors compensation. Also, no matter how sad your story is, you still owe the debt; sad stories won't make the debt go away.

• Control the flow of your financial and private information. The debt collector doesn't need to know your martial status, your age, your employment history, employment bonuses, federal tax income refund checks, your bank account numbers, if you're a homeowner and other similar information. A debt buyer could later use this information to help determine whether you're a good candidate for a debt collection lawsuit.

• You must stay calm when you talk to a debt collector. How do you stay calm and focused? First, read the FDCPA and take control of the call. Also, if you have a tape recorder, ask the debt collector if they agree to the recording of the phone call. The recorded call will keep the debt collector on their best behavior.

• If you agree to any payment plans, then get the agreement in writing. If the debt collector claims payment must be received today, then have the debt collector fax you the agreement.

• Ask the debt collector to positively update any collection agency entry on your credit report; a status of “paid in full” is better than a status of “settled”. If the debt collector agrees, then get the agreement in writing.

• Try to negotiate your account at the end of the month.

• If you've been harassed by a debt collector, but all means take the time and file a compliant with the Federal Trade Commission (FTC) and your state's general attorney's office. Filing a compliant is analogous to voting. When your state attorney general receives hundreds and even thousands of complaints about a debt collection agency, that puts the debt collector on the attorney generals consumer protection division radar; a class-action lawsuit may follow.

• If you have been harassed by debt collectors and can provide proof of the harassment, many attorneys are ready to represent you in court. You also have the option of representing yourself in small claims court, assuming your state has laws regulating debt collectors; check your state statutes and state attorney general's website.