5 Ways to Handle Debt Collection

For those of us that have dealt with debt collectors, we understand how they can be pushy or downright rude. They try to intimidate you and pressure you into paying a debt, whether it's legitimate, or not. Don't you wish for a way to make them leave you alone? Well, you can.

• Debt collectors can call/contact you to pay the debt. Debt collectors force you to pay the debt through the court system. Your wages could be garnished, or a lien placed on your home. The original creditor may refuse to do business with you until you pay the debt.

• Debt collectors cannot harass you, call incessantly, or at "inconvenient hours". Misrepresenting the debt, the legal status, or presenting themselves as a government agency, could be violations of state and federal laws.

• Once reported to the credit bureaus, debt and delinquencies will remain on your credit report for 7-years. If it's still on your credit report after that period, contact the bureau to have it removed.

*For the purpose of this article, "debt collector" and “collection agency” will be used interchangeably.

1.     Pay the original creditor

Do I have to talk to the debt collector?

   Not if you don't want to. If you want to pay the debt without going through the debt collector, you may be able to call the original creditor. Most financial professionals will tell you this isn't an option because the debt was sold to the collection agency. In most cases, they'd be correct. However, in my younger years, I have personally paid the original creditor and satisfied the debt. This may not be an option in every case, but it’s certainly worth trying.

2.     Dispute the debt

I don't know where this debt is from

   If you don't know whether this debt is legitimate, you can request verification from the collection agency, which they must provide. It's surprising how often two people have the same name or similar social security numbers. The Consumer Finance Protection Bureau (CFPB) has a letter  available to ask the debt collector for clarification. Download a free copy of the Debt Collector Response sample letter from the CFPB. If this debt isn't legitimate, you can send a letter of dispute to the debt collector explaining the situation. Additionally, you can send this letter if you believe the amount is incorrect. As a bonus, once the debt collector sends you validating information, if you send a dispute letter within 30-days, the debt collector must stop collection attempts until they're able to provide more information to verify the debt.

3.     Offer to settle the debt for lesser amount

Do I need to pay the full amount?

   Sometimes you can't afford to pay what the debt collector wants you to pay. If the debt is relatively old, or if you explain to the collector that you can't afford it, they may be willing to settle at a lower amount. But it's important that any agreed payment amount be in writing prior to payment. Without having a written agreement for the new amount, the collection agency would still be able to contact you to collect the full amount. If you're in a situation where you can only pay a portion of the debt, haggling a lower amount is your best bet, and start low; approximately 30-40% of the amount you're able to pay.

   Ex. If you can only afford to pay $50 on a $100 debt, offer to pay $15 (50 x 0.3(30%) = 15)

4.     Report any misbehavior

They're getting a little pushy and annoying. What now?

   If you feel that the debt collector is harassing you, calling at "inconvenient" hours (generally outside the hours of 8AM - 9PM, unless you work nights), or if they call your place of work. Debt collectors cannot discuss your debt with others unless they have your consent. Furthermore, collection agencies cannot indicate on mailed envelopes that they are a collection agency, either. You can report any misbehavior to the Federal Trade Commission, the CFPB, and that states attorney general. All debt collectors must adhere to the Fair Debt Collection Practices Act.

5.     Tell them to stop contacting you

Can't I just tell them to leave me alone?

   Yes, you can. This won't erase the debt, but it will mean that the collection agency that currently holds the debt will stop calling/contacting you. If you don't want them contacting you at a specific place or time, tell them "Please do not contact me at this number", or "Please do not contact me after 4PM, it is not convenient". To stop all contact, you can send a "stop contact" letter requesting the collector no longer contact you regarding this debt. You can find a template letter from the CFPB here. There are two caveats: 1) They may contact you to let you know they will no longer contact you 2) That they will take other actions against you (notification must be legitimate and not a threatening/intimidating tactic). If a lawyer is representing you with regards to your debt(s), debt collectors may no longer contact you, except through your lawyer.

   We often feel as though we have little or no options when facing a financial hardship. Debt collectors are skilled at making us feel small and ashamed, but you have options. Sometimes, what we need is some time to find a solution to our problems, but that can be tricky when debt collectors are hounding you for money. I’m not saying you shouldn’t pay your debts, but I think it’s important to sure that the right bills take priority.

Glossary:

Debt Collector: Individual who works for a debt-collection agency, or acts on their behalf, to contact you to pay a debt.

Collection Agency: The company that “bought” your debt from the original creditor when the owed amount went into “default”; the company that has legal right to collect payment for a debt.

Original creditor: The company that an individual owed money to before the account went into default, and then sent to a collection agency.