Money milestones: How to deal with debt collectors
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Getting called by a debt collector can be stressful, whether you knew you had an account in collections or thought you were current on all your debts. Debt collectors can use high pressure tactics to get you to pay now, including hounding you with calls.
The debt collection industry is full of mistakes and relies on consumers not exercising their rights, said John DeVore Compton, III, an attorney at Compton Law Firm, LLC.
“Consumer ignorance and lack of follow up is what the industry counts on,” he said.
Even if you believe you legitimately owe the debt, you shouldn’t pay it on the spot. Otherwise you could end up paying a debt you don’t owe or the debt collector can’t prove. Here’s what to do when you get a call from collections.
Debt collectors spend every effort on getting you to pay because it’s how they make their money. They may rush you or neglect to give you all the details you need to verify a debt. For your own information, you should take detailed notes and document everything that is discussed on the call.
Make sure you write down the time and date of the call, the name of the person you speak with, the agency they’re calling from and its contact information, the amount they say you owe, the name of the original creditor, and anything else the caller tells you.
If you don’t have the time to pay close attention and take notes, ask the debt collector to call back at a better time (unless you want them to stop calling altogether — more on that in a minute).
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Don’t panic and don’t pay, even if you think the debt is legitimate. You are not required to pay a debt on the spot when a debt collector makes first contact. You shouldn’t even confirm the debt is yours, as this admission could be used against you.
“Never pay just because a debt collector gets ugly, makes threats, harasses, communicates improperly, doesn't follow required consumer law procedure, and on and on,” said Compton. Consumer protection laws are in place to protect you, so don’t be afraid to pursue that course if needed, especially if the collector abused you or broke the law, he said.
Some collectors may call you about an illegitimate debt or misstate the amount you owe. If a collector doesn’t have sufficient evidence to support the debt, you could possibly avoid paying altogether. But you’ll need more information, which brings us to the next step.
Under the Fair Debt Collection Practices Act (FDCPA), debt collectors must send you a written notice containing the amount of the debt, name of the creditor, instructions for disputing the debt, and details for requesting more information. The notice must be sent within five days after the debt collector first contacts you, unless the information was provided to you in the initial communication. You should reiterate on the call that you need more information sent to you in writing.
If you don’t receive a written notice, you can send a debt verification letter to the collector asking for more information, including the name of the original creditor and proof that you owe the debt (the Consumer Financial Protection Bureau has sample letters here). Try to send this request within 30 days of first contact, as your legal protections are greater within this time frame. After 30 days the debt is considered valid by the collector.
If the debt collector is harassing you or engaging in illegal behavior — or you just want them to stop calling — you can tell them to leave you alone. But it’s a good idea to get as much information about the debt as possible before you decide to cease contact.
Under the FDCPA, it is against the law for debt collectors to:
Threaten you with violence or bodily harm
Use profanity or vulgar language
Harass you with repeated phone calls
Lie about the amount of debt you owe or the consequences of nonpayment
Contact you outside the hours of 8 a.m. and 9 p.m.
Contact you at your place of employment if your employer prohibits the communication
Contact third parties about your debt outside of your attorney, consumer reporting agencies, the original creditor, or the collector’s attorney
If the debt collector engages in any of these practices, tell them to stop contacting you and report them to your state’s attorney general’s office, the Federal Trade Commission and the Consumer Financial Protection Bureau. You can also tell the collector to stop contacting you just because you want them to, even if their behavior is within the law.
To block a debt collector from contacting you, send a written request to cease communication to the collector’s business address. Once they receive it, they are forbidden from contacting you except to inform you there will be no further contact, and to tell you if they are taking specific actions like filing a lawsuit.
Just because the debt collector stops calling doesn’t mean your debt is canceled. You can still get sued. If the collector wins, your wages could be garnished or you may be required to pay the debt from your bank account.
You have several options for what to do next. You can pay the debt, dispute the debt or not pay it.
Pay the debt
Once the debt collector sends you more information about the debt, you should verify that it is legitimate. To stop collection proceedings, pay your debt to the collector and avoid future negative consequences.
You might be able to negotiate a lower lump sum payment with the collector, in which you agree to pay a reduced amount of the debt to settle it. Paying as much as you can to settle the debt, even if it’s only a fraction of what you owe, may give the collector motivation to work with you.
Alternatively, the collector may set up a payment plan so you can pay off the debt over time. Make sure to get any payment agreement in writing.
Dispute the debt
Once you are contacted by the debt collector, you have 30 days to dispute the debt in a letter to the collector. Your letter should state that you are disputing the fact that you owe the debt and request proof of the debt’s validity. You can also ask the collector to report the debt as disputed to the credit bureaus.
After you dispute the debt, the collector must cease all collections activity until they have provided verification that the debt is legitimate or provide you with the name and address of the original creditor so that you can verify with them.
Don’t pay the debt
Older debts may have passed the point at which you’re legally responsible for them, which means you may be able to avoid paying. This is also known as a time-barred debt.
If the debt is time-barred, which means your debt has passed the statute of limitations in your state, you could potentially avoid paying it without further consequences. In some states you would have to bring up the age of the debt in court to get it fully dismissed.
Debt collectors can’t successfully sue you over a time-barred debt if you demonstrate it is time-barred, but they can still try and attempt to collect. Keep in mind that time-barred debts stay on your credit report for up to seven years. Making a partial payment may ‘revive’ the debt and start the statute of limitations over. Compton warns some debt collectors will purposefully purchase time-barred debts, then attempt to collect.
Research the statute of limitations in your state, and consider seeking the advice of an attorney for significant debts that are time-barred or are approaching the statute of limitations.
Once you’ve learned more about your debt, you should check your credit report for the account in question. If you pay the debt, you will want to make sure the account is updated as paid on your report. If the account is illegitimate, you will want to dispute it and get it removed from your credit report entirely — it can be time consuming and labor intensive, but you can do it yourself.
When negative information like an account in collections lands on your credit report, they can drag down your credit score and cost you more money in interest rates and even insurance premiums. It’s in your financial best interest to know what’s in your credit report, get false information removed and resolve outstanding debts whenever you can.
It’s a long read, but the full Fair Debt Collection Practices Act lays out what debt collectors are and aren’t allowed to do.
Not sure how to write a letter to a debt collector? The CFPB has sample letters for your use.
Image: GettyImages / Alfred Gescheidt