Sometimes you miss a bill – it happens. Maybe you couldn’t cover it right away and set it aside for later. Maybe you just forgot about it. Now you’re getting calls from debt collectors. What’s the best way to deal with collection agencies?
What Is A Collection Agency?
First, you need to know what a collection agency actually is. It’s easy for consumers to confuse collection agencies with debt buyers, but the distinction may matter in your interactions with a collector.
When you owe a debt, the company that you owe has to keep that debt on their records for accounting purposes. They may send you bills and notices and make other efforts to get you to pay, but they’ll only try for so long. Once they decide that you’re not likely to pay, that company may either choose to pass your account on to a collection agency or to sell your account to a debt buyer.
A collection agency acts on behalf of the creditor, attempting to collect on the debt for them. The creditor pays the collection agency for that service, often with a percentage of what the agency collects for them. Throughout this process, the creditor still owns the debt and has the ultimate say about what they will accept to resolve the debt.
A debt buyer makes its money by purchasing debts at a discount and then collecting as much as they can of the full amount. For example, say you owe $5,000 in credit card debt that you haven’t paid. When the credit card company decides that you’re not likely to pay them back, they may sell the account to a debt buyer for a much smaller amount – maybe just 10%, or $500. That agency will then take over trying to get you to pay, and will keep whatever they collect from you. Since the debt buyer owns the debt, they can decide for themselves what kind of settlement to reach with you. And, since they’ve often paid a small fraction of the amount of the debt, they can often offer significant discounts and still make a profit.
Because their profit depends on getting you to pay, both collection agencies and debt buyers may be very aggressive about trying to get your money.
Even with the protection of the law, it can be scary and frustrating to field collection calls. Here are our top tips for how to handle it.
1. Document Everything
Keep a detailed record of all communication between you and the collection agency. That includes phone calls, email, snail mail, and any other mode of communication. Mark down the time and date of each phone call, who initiated the call, the number you called or they called from, the name of the person you spoke to and what was said.
Save all emails and mailings. When you receive something in the mail, note the date you actually received it–sometimes that’s very different from the date printed on the letter or statement.
If you send a letter, request, dispute or other communication to a collectio agency or debt buyer, make sure you keep a copy of that, too–along with the date you sent it and how you sent it.
This has two benefits. First, you’ll have a complete record of all the information pertaining to the collection. Second, if the collector is harassing you and you need to file a complaint, the record will act as evidence.
2. Get It In Writing
The first notice you get that your account has been sent to collections often comes in the form of a phone call. It can be a little frightening and little overwhelming, so it’s easy to miss the details over the phone. It’s also easy for the debt collector to misrepresent what was said.
If you get a call about a debt, you can request that they contact you in writing instead. By law, debt collectors must send you a written validation notice within five days of first contacting you (unless the required information is provided in the initial communication). The notice must include key details about the debt, the current creditor, and instructions for disputing the debt within the time limits set by federal law.
Your communications should be in writing, too. Collectors love to get you on the phone because you have to react on the spot, and because later you may not be able to prove what you did or didn’t say. They’ll try to goad or trick you into admitting that you owe a debt or agreeing to paying on the spot without full information. You don’t want to be in that position. Instead, keep quiet. Don’t admit to anything, don’t promise anything, and don’t pay anything. Once they’ve sent a written record of the debt to you, you should respond only in writing. That gives you time to think about what you want to say so that you don’t get caught off guard, and creates a written record of your communications. Dealing with collection agencies is hard enough without the element of surprise.
In addition to giving you a clear and detailed picture of what’s going, this makes your record keeping easier.
3. Ask For Proof
Remember that when you’re dealing with a collection agency or debt buyer, you’re not dealing with your original creditor. These agencies don’t always handle the paperwork appropriately and may not even actually have a right to collect your debt. If you’re contacted by a debt collector, you should request full information about the debt in writing. Ask for proof that they actually own the debt or have the right to collect it on behalf of the creditor, and for proof that the debt is still collectible.
California has different statutes of limitations depending on the type of debt. Written contracts generally have a four-year limit, while oral contracts may have a shorter limitation period. Once the statute of limitations has expired, the debt may no longer be legally enforceable, even if collectors still attempt to collect. You should also ask for proof that they’re asking for the right amount and check it against your own records. Some dishonest companies will claim that you owe more than you actually do in the hopes that you’ll pay it without checking. Others are simply sloppy, or have received inaccurate information from the original creditor.
4. Explore Your Options
A call from a collection agency doesn’t mean you have to pay that debt on the spot. The company may not have the right to collect the debt. They may also be willing to settle for less than the full amount, or to work out a payment arrangement that allows you to make smaller payments over time.
If you believe that you don’t owe the debt, that the collection agency doesn’t have the right to collect, that you owe a different amount than they’re asking for, or that the statute of limitations has run, you should dispute the debt before you pay anything. The written notice from the collection agency will explain the procedures for disputes with that particular company.
If they have the appropriate proof that the debt is legitimate, you still may not have to pay the full amount. Ask the collector about your options for debt settlement, where you pay less than the full amount and in return they agree not to collect the rest. Note that settling a debt may still affect your credit score, but it is generally viewed more favorably than leaving a collection unpaid. The exact impact depends on the credit scoring model being used and how the account is reported.
5. Know Your Rights
When you’re dealing with collection agencies or debt buyers, they’re betting that you don’t know your own rights. They don’t want you to ask questions and they don’t want you to know the rules. That makes it easier for them to intimidate you into paying. The best thing you can do is learn your rights – remember that under federal law, including the Fair Debt Collection Practices Act (FDCPA), debt collectors are prohibited from harassing you, calling at unreasonable hours, repeatedly contacting you to intimidate you, or discussing your debt with third parties.
When in doubt, consider reaching out to an experienced local attorney. Bring the record of your interactions with the collection agency and any financial records that have to do with the alleged debt. An attorney can help you determine if the debt is legitimate and how best to go about dealing with it. You may be entitled to compensation if the collector is harassing you.
We Can Help
If you’re dealing with collection agencies, we may be able to help. Take advantage of a free case evaluation and consultation with one of our experienced attorneys today to learn about your options and your rights. Don’t let collection agencies take advantage of you.