Getting into financial trouble that results in debt collection is not an easy challenge to deal with for anyone. Whether financial management has been an ongoing battle or a few small missteps here and there led to the issue, receiving a call from a debt collection agency can be jarring. Unfortunately, the strategies for dealing with debt collection agencies are not well-known. Many feel as though they have no choice but to accept the calls, and in some cases, respond to the berating demands for money from the other side of the line.
However, debt collection agencies that are licensed to provide collection services to third parties have a strict set of rules they must follow when interacting with consumers. If you have been contacted by a debt collector, here are five steps you can take to eliminate some of the stress you may experience.
First, it is important to understand the two broad types of debt collection: in-house and third-party collectors. With an in-house debt collection call, your creditor has, such as a loan company, bank, or credit card issuer, has transferred a delinquent account to an internal collections department. This step typically takes place when a debtor is past due on an account by no more than 90 or 120 days. In many cases, in-house collection agencies are less aggressive than their third-party counterparts.
With a third party debt collector, a separate company has purchased delinquent debts from a creditor at a deeply discounted rate. That company then goes after debtors to collect outstanding debts that are seriously delinquent – typically more than 120 days with no payment. Third party debt collectors have regulations they must abide by when speaking with consumers. However, when a third party collections agency reaches out, you know the debt they are referencing is well beyond its due date.
Under the Fair Debt Collection Practices Act, or FDCPA, consumers are protected against unlawful and scrupulous tactics used by some debt collectors. It is necessary to know your rights since some debt collection agencies, even those who are licensed and bonded, do not work in line with these regulations. The main protections and rights under the FDCPA include the following:
Beyond federal laws, nearly all states have additional rules under which debt collection agencies must operate, including a requirement to hold a surety bond to help protect consumers from fraudulent or abusive practices. A surety bond pays out claims to consumers against debt collection agencies that do not follow the laws of the state in which they operate. Individuals who receive debt collection calls need to know these regulations, as well as their rights under FDCPA in the event communication or demands, get out of hand.
Under federal law, a debt collection agency is required to provide certain details of the debt they claim to be owed, including the name of the original creditor, the amount owed, and the action that can be taken if the debt is disputed. This information must be provided when requested within five business days, in writing. Always ask for these details before having extensive conversations with debt collection agencies over the phone.
It is also necessary to keep detailed notes about the communication received from a debt collector. Details may include the time and date of phone calls, notes about what was discussed, and any recorded messages or voicemails from the collection agency. Whether the debt is ultimately validated or disputed, these details play a crucial role in making a case for negotiation or cancellation.
One of the most important steps consumers miss when dealing with debt collection agencies is the request to validate the debt in question. Validation of debt is the process the debt collector must take when requested to prove the debt is truly the consumer’s responsibility. There are some cases where debt collectors have the wrong information, or the balances are outdated and have already been repaid. A request for validation forces the collection agency to provide written information about the debt. If they cannot do so, you have no obligation to pay the debt, and the collection agency can no longer bother you for repayment.
If, after receiving debt validation as well as details of the debt in writing, the debt is your responsibility, know you have options. Many debt collection agencies expect you to negotiate the balance owed down from the original amount. Because they likely purchased the debt for pennies on the dollar, you can often pay far less than the total amount owed. However, be prepared with a realistic number in mind that you can afford and pay immediately.
If you don’t feel comfortable negotiating the debt balance, or you simply do not want to deal with the collections agency directly, there are companies that provide debt settlement and relief services on your behalf. Be sure to check the legitimacy of a provider before providing any of your information, and get any service agreement in writing.
Dealing with a debt collection agency is a stressful task, but knowing the steps to take can take away some of the feelings of anxiety and overwhelm. Be sure to understand how delinquent your debts are, and which type of debt collector you are working with. Always ask for details and debt validation in writing, and keep notes and records of interactions along the way. Most importantly, understand your rights under the FDCPA, including what debt collectors can and cannot do.