Debt collections can be a frightening experience for any borrower. After all, many have their share of rude, threatening phone calls and letters from debt collectors.
If you find yourself in this situation (or you want to avoid it), you need to be familiar with the Fair Debt Collections Act definition. It stipulates some practices a collection agency can’t do. You can also take proactive approaches.
Debt Collections | 5 Empowering Ways to Deal with Debt Collectors
In This Article:
1. Make Sure the Debt Is Yours
Debt collections can be horrible as collectors can be frightening and intimidating. They can make you feel guilty. The guilt comes from knowing you have a history of late payments or are suffering from too much debt right now.
Not all calls from the debt collections agency are legitimate. They may be a “junk collector” who buys old debts from the original creditor. It may not even be you who held the original debt.
When you receive a call, ask them to tell you the name of the creditor they represent. If that name doesn’t sound familiar, ask for the name of the original credit card or loan provider and the amount of the debt.
If you can’t get the answers you need over the phone, demand they send the original creditor, amount owed, and their system for disputing the bill by mail. If the debt collectors who contacted you aren’t legitimate, this may be the last you hear of them.
2. Dispute Debt Collections Claims When Appropriate
There are times when you legitimately don’t owe the money you’re being harassed about. (It could be you don’t according to your recollection.) Someone with a similar name or Social Security number may be the actual person who holds the debt.
It’s also possible you already paid the debt. You may have also set up a debt relief program with the original creditor.
The debt collections agency can still call when there is confusion along the way. The lender, for example, may have forgotten to update their debt collections and management software.
When you want to dispute, gather any information you have supporting it. It can be a document with your name and Social Security number on it if there is mistaken identity. If you already paid the loan, send a copy of a canceled check or an old statement from the original creditor. It can be a letter stating you know longer owe anything.
Send these copies and a dispute letter to the debt collector. It’s a good idea to make a copy of everything you sent. You may need it later.
Remind the debt collector they can’t contact you until they have verified the debt or have given up on the claim.
The debt collector may verify you do owe the money. If you don’t agree with this validation, contact the Consumer Financial Protection Bureau (CFPB). Submit the copy you furnished to the debt collections agency to them.
3. Assert Your Rights Even When the Debt is Legitimate
Being a debtor doesn’t give the creditor or the debt collections company the right to harass and threaten you.
Just as there are creditors’ rights in debt collections, you also have yours too:
- They can’t call you anytime they want. They can’t call earlier than 8:00 a.m. or after 9:00 p.m. They also can’t do it while you’re at work unless you give them the permission.
- They can call you only once. If they keep on calling, you can write them a request. The Federal Trade Commission (FTC) suggests sending a letter with a return receipt.
- They may contact other people but only if they want more information to reach out to you. These could be your new phone number or address. They can’t share your debt details with anybody else.
- They can’t intimidate third parties such as your spouse or children to force you to pay the debt.
- Debt collectors should not practice any of these behaviors. A debt collector can garnish your wages but only if they sue you and win in court.
4. Pay Attention to the Statute of Limitations
The Fair Debt Collections Act imposes a statute of limitations on debt collection. It means the creditor or the collecting agency can’t ask you to pay a debt if the prescribed period has already expired. This can vary from state to state.
Be forewarned, though. It’s possible for an old debt to be excluded from the statute. In fact, you can restart it. It happens when you make any activity to the debt. You may have paid a portion of it or even informed the creditor or the agency you’re going to pay it.
5. Negotiate the Amount Owed
The previous tips should help you deal with debt collections with more empowerment. They, though, don’t eliminate your debt. If you have it, and it remains unpaid, it can hurt your credit score badly.
The good thing is you can still negotiate your debt with the collections agency. In fact, you may even reduce how much you owe.
Offer about 50 percent of the amount owed. Remind the caller the amount they paid for the original debt was far less than that. If they agree to these terms, get the understanding set up in writing.
The debt collections agencies may demand a direct withdrawal system as part of the agreement. If so, set up a separate checking account with your bank. Keep only the monthly amount needed in this account.
That’s important in case the debt collections agency decides to hit you with previously undiscussed “fees.” These would otherwise be taken from your main checking account when you’re not prepared to cover it. Creating a second account limits what they have access to.
Can You Go to Jail for Debt Collections?
Jail time is a favorite scare tactic by some debt collections agencies for a reason: nobody wants it. The truth is you can’t go to jail for not paying your consumer debt.
In fact, you can sue the debt collector under the Fair Debt Collections Act if they use it against you. Note, though, you can be cited with contempt of court. It can land you in jail. It happens when you ignore a court order.
What happens if the debt collections agency sues you? This video from Alabama Consumer Protection Lawyers can give you an idea:
Debt collections can be scary, but when you know your rights, they become less intimidating. Know you can call the CFPB to ask if your debt collector follows fair practices.
If not, ignore the insults and threats and assert your rights. Let them know you’re aware of what they can and cannot do. When you really do owe them money, focus on concrete and fair ways for paying off the debt.
How do you deal with debt collections? Tell us your tips in the comments section below.
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