How To Deal With Collection Agencies and Bill Collectors

The consumer who does not understand the process is at a great disadvantage, and collection agencies are keen to exploit this lack of knowledge. This article is an overview of what you should know when you are dealing with collection agency harassment or you are getting annoying phone calls from debt collectors.

Knowing what to do or say is your key to keeping more of your hard-earned money when you are dealing with a collection agency. We've assembled what you need to know, including what rights you really have and what to do if a collection agency starts harrassing you without cause.

Laws of the state in which you reside trump anything written here. These guidelines only apply to firms that do business as a collection agency, that is: collecting debts for other businesses. A business that is collecting its own debts are exempt.

Dealing with a collection agency can be a frustrating, embarrassing, aggravating experience. But if you owe a debt that a collection agency is being paid to collect, you need to know your rights to protect yourself and your peace of mind.

The moment when a collection agency first contacts you, it must give its name, address, and the name of the original creditor (the business or person you owe money). That collection agency must also tell you in writing the amount of the debt, detailing any fees that have been added, such as interest and collection fees. Furthermore, they need to inform you of your right to dispute that information.

A collection agency is not authorized to call or write you more than three times a week. They can use only one of those calls a week to call you at work. Laws prevent them from call you between 9 pm and 8 am. in the time zone in which you live.

A collection agency cannot use harassment, intimidation, threats, or slights & practices that embarrass you. A collection agency cannot threaten violence, tell you they will bring on criminal prosecution, or curse & use foul language. You are protected from these verbal threats.

By sending a written statement requesting a collection agency stop contacting you, that collection agency cannot continue to call or write you demanding payment.

What A Collection Agency Can & Cannot Do When Contacting Other People

If you have an attorney and that collection agency knows it, the law prohibits the collection agency from contacting anyone other than your attorney. But if you don't have an attorney, you still have privacy: a collection agency can only contact other people to find out (1) where you live or (2) where you work. It is important to realize that the law prevents the collector from telling these people that you owe money. A collection agency is allowed to usually only contact these people one time, and only one time for contacting your employer.

Can Collection Agencies Notify A Credit Bureau?

Yes. A collection agency trying to collect on a legitimate debt of yours can inceed contact a credit reporting bureau about that debt. But if you had previously disputed that debt in writing, they must include this information to the credit bureau as well, so you won't be getting blindsiding.

Can A Collection Agency Collect Additional Charges?

Only if your original purchase contract specified that you agreed to pay "collection costs" can a collection agency add additional charges onto your debt. Pull out the original contract and read it over to find out if this is the case. If you agreed to pay these charges somewhere in the fine print (and, face it, who reads the fine print when you're signing contracts?), the agency can indeed add reasonable charges such as attorney fees, credit report fees, court costs, and other items. When a collection agency is collecting on a bad check (and who takes checks anymore?), the agency can indeed add collection and legal fees, but only as allowed by the state laws in which you live.

Will Partial Payments Accepted?

A collection agency has the right to demand full payment of the debt in question. It does have the option, but does not have to accept, a partial payment plan on the debt.

Can I Send Post Dated Checks To Collection Agencies?

Although a collection agency has the right to request that you send them a postdated check to clear your debt, you cannot be required to do so. And, if you do give a collection agency a post-dated check, you still have federal laws protecting you. That check cannot be deposited before the date you've written on it. The agency cannot deposit is early and possibly cause you to have an overdrawn bank balance. Further, if you send a post-dated check to the agency and the date written on it is more than five days in the future, then that collection agency is required to give you timely written notice before they deposit your check. Get the exact details down on paper when dealing with a collection agency, and always write down names, phone numbers, extensions, times you talked with them, etc.

Things A Collection Agency Cannot Do:
1. publish lists of people who owe money;
2. use a badge or uniform of a law enforcement agency or claim to be from a government agency;
3. use documents which look like court or government documents, telegrams, or emergency messages;
make collect phone calls or send collect telegrams;
5. violate postal regulations;
6. threaten to add charges that aren't legal, for example, an interest rate higher than the rate in the original contract;
7. garnish your wages or take your home or possessions without a court judgment, however, an exception exists for federally guaranteed student loans that are in default. A federal law provides for an administrative garnishment up to 10% of the debtor's pay, or;
8. threaten to have a debtor put in jail for bad debt.

What can you do if you believe a debt collector violated the law?

You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney' s fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector' s net worth, whichever is less.

Where can you report a debt collector for an alleged violation?

Report any problems you have with a debt collector to your state Attorney General' s office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General' s office can help you determine your rights.

Consumer protection laws exist to help protect you from overzealous collection agents who bend and/or break the law in their attempts to collect a past due you owe. You can report bill collectors who break the law through the Federal Trade Commission’s own public website.

For the free FTC Complaint Form... click here

How to handle debt collection calls by Douglas Michaels

At some point in our lives unplanned for events befall the best of us and some can have far-reaching consequences. Take the loss of a job for instance. That’s a near certainty to occur to us a least once in our working lives and one of the consequences is likely to be falling behind on our bills. Unless you happen to leave your job with a generous severance package and have large pools of savings to draw on, chances are there are going to be some late payments ahead for you.

There are some bills you will continue to pay, no matter what, but there are others you will let slide. The electricity and water must continue to flow unless you relish camping in the backyard, but the tier two expenses like credit card payments, cable and cell phone bills and maybe even the car payment, will take a hit. Rather than cringe in fear waiting for the debt collection calls to come, you may as well buckle up and make a pre-emptive strike.

Making the call

Assuming you have the means to make some kind of payment, round up all your statements, list the balances and minimum payments along with the phone numbers and prepare to start calling.

If you have been a good customer for a number of years, some creditors may actually grant you a grace period on your debt while you search for work. But you’ll never know unless you ask. The first call to your creditor is the most important. Bear in mind that you are going begging essentially and assume the humble position. And if the stars align in the right position on the day of your call, you may get a sympathetic account rep on the other end of the line. But you must be prepared to act your humblest best.

Most service companies spend small fortunes acquiring customers and are reluctant to lose long-term clients. If the account rep can’t suspend your debt payments, ask in the nicest fashion if they think a supervisor would be willing to bend the rules. That’s music to your account rep’s ear as they often are not paid well enough to go out on a limb and will be more than willing to pass you on to someone higher up.

Talk to the right person

Should you be unfortunate enough to get the village crank on the other end of the line, make an excuse to get off the phone by pretending to hear the baby crying. Even the crank will let you off easy without making derogatory statements in your account record if you are taking care of an alleged baby. Wait a couple of hours or until a shift change is likely after 5pm and call again. The next account rep you get may treat you completely differently.

State your case plainly, emphasizing that you are willing to pay your debt but you are between jobs. And ask for the moon. Some auto credit companies may have programs that suspend your payments for as much as three months while most will do at least two. Cell phone and credit card companies may agree to a two month grace period, but you will never find out until you pick up the phone. You may even offer to sweeten the deal by making a reduced debt payment for a fixed period of time but above all else, you must remain as polite and sweet tempered as possible no matter the circumstances.

If your calls turn out to be unsuccessful and your creditors demand full payment, focus on paying your most important bills first. You must keep the phone line on if you are job searching and you may want to consider signing up for dial-up internet service with a low-cost carrier lest you lose the broadband. Those two items, together with a working auto are crucial to your job search activities

Settling your debts

Should you be unfortunate enough to go through an extended period of unemployment, it may be necessary to dig yourself out of a mountain of debt. Rebuilding your credit report score should become a top priority once your cash flow position improves. Start by getting a copy of your credit report to see who has reported your missed debt payments and get a total of what you owe. You are now going to make a different type of debt collection call entirely; once again, politeness is the key and I’ll explain why in a moment.

Know that there are two ways to pay off debts that have gone bad. You can choose to pay in full or you can ask for a settlement. I tend to favor paying in full as the effect on your credit report score is more positive if you have a string of paid accounts than if your credit report shows “settled for less than the balance due.” That being said, if cash flow is a constraint and you want to get on with the rebuilding process, call your creditors and ask if they offer settlements. This will begin a process of bargaining during which you will suggest a modest percentage settlement but not one so outrageously low that you start off on a bad note with the account rep on the other end of the line.

You may even go so far as to ask that the settlement be split into three or four equal payments. If your debt is a year or older, many companies will agree to a sharp bargain rather than sell the debt for 10 cents on the dollar to a collection agency. The larger the debt, the lower the percentage you should offer, but do so in a spirit of amicable discussion.

Get it in writing

And should you be skillful enough to reach an agreement with which you can live, ask for the settlement agreement in writing. If they balk at knocking themselves out writing a letter, explain that your crusty uncle Joe is paying the debt for you and won’t part with so much as a dime unless he sees it in writing. Once you have secured the promise of a settlement letter, humbly ask if you will be able to get a paid letter at the end of the exercise and if they will be reporting to the credit bureaus after you have paid. If they tell you they do no issue paid letters, politely ask to be excused and call the next creditor in line.

Repeat the call

Repeat the process until you have your offers in hand and you paid letters secured in a safe place. Then check your credit report a month or two after you have paid the debt to ensure they have updated your record. If nothing has happened, your paid letters will be proof to the credit reporting bureaus that you have paid or settled your debt and they are required by federal law to upgrade their records.

One last tip remains. If your debt has been bought by a collection agency and you have any small doubt they will act ethically, pay nothing until you get a settlement offer letter, and pay with a method that ensures someone signs for your payment instrument and that carries some written record of the transaction.