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How to Deal With Creditors and Collection Agencies

By Erik Folgate

Here’s how to deal with a creditor: Tell them to shut up, give the finger to the phone, and hang up! No, just kidding, but I know we all think about doing that sometimes. If you have fallen behind on some bills or you have some really old bills that you let go and they insist on calling you 5 years later, remember to always keep your composure. Collection agents and creditors thrive on threatening you, scaring you, or backing you into a corner and trying to get you to think in an irrational manner. NEVER stoop to their level. Depending on the company or agency, they WILL be ruthless at some point. This goes mostly for unsecured debt creditors. Auto loan and mortgage creditors are generally more reputable, because they know that they can just take the car or house away if it gets too bad. Here are five steps to dealing with creditors and collection agencies.

  1. Check your credit report. Make sure the debt is yours! You’d be surprised at how many weird things show up on a credit report.
  2. Get familiar with everything that the Fair Debt Collection Practices Act that gives rights to consumers and regulates the practices of collection agencies and creditors. From The Wikipedia articles about the FDCPA you’ll find all of the prohibited conduct and conduct required by the collection agents and creditors. Make yourself VERY familiar with what they can and cannot do and know your rights! If they pass any of these boundaries during the phone call, tell them specifically that they are violating the FDCPA and if they continue to do so, you will sue them. Then, end the call. I am serious, DO NOT let these people abuse you. They will try every trick and manipulation in the book to try to get you to do something stupid.
  3. Check your credit report. Make sure the debt is yours! You’d be surprised at how many weird things show up on a credit report.
  4. If the debt is really old and you truly don’t have the money to pay it back, then try to negotiate with the creditor. They will refuse at first, but if you make it known to them that they can either get something rather than nothing, they’ll eventually budge. If you do come to an agreement for a settlement amount, MAKE SURE that you get the agreement in writing.
  5. NEVER give them access to your bank accounts or give them post dated checks. They WILL NOT stick to their promise of taking out the money at intervals. If you owe them $1000 and give them EFT access, they’ll wipe out the entire $1000 the first chance that they get.
  6. Make a plan to pay off your debts. If you legitimately owe the money, then make a plan to save enough up to pay the bad debt all in one lump sum. Again, make sure that you get it in writing stating, “this amount is a paid settlement IN FULL”. I’ve heard of collection agencies that say you owe X amount of dollars, you pay the bill, and then six months later they say you owe more for late fees and interest.

Just remember that the ball is in your court. YOU have what THEY want. They’ll try to make you feel bad, make you angry, make you cry, make you feel like a criminal, but remember that you didn’t pay the debt for a reason. You didn’t have the money! Your priorities need to be Food, Shelter, Utilities, Transportation, and THEN paying debt. Never let someone con you into paying a bad debt in a lump sum, and then you can’t pay for the mortgage or rent that month. Don’t even let that scenario cross your mind! It’s not about being deceptive or being irresponsible. I believe you need to pay off old debts, but don’t let them manipulate you, and most of all, don’t let them get you to pay a debt that you can’t afford.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.rogersplaceblog.com Rogers Place

    If a creditor is too pushy you can send a cease and desist order. Their harassment will stop and you will most likely then be contacted by another credit agency. Hopefully they won’t be so harassing. An example letter is available online by searching for debtor rights. Can’t remember the exact location, but one is available from a federal government site.

    You may owe money, but there are laws that protect you and govern the practices of debt collectors.

    This is not an excuse to ignore debt. If you owe debt do your part to settle this debt.

    • Joe

      Sending a cease and desist order is just asking for a creditor to file a lawsuit against you, and if they win the lawsuit (and most likely they will if you owe them money), they will be able to garnish your wages. A cease and desist order should be the last option. If you really want to get to a creditor, record every phone call you have with them, and let them know you are doing so. If they do anything out of bounds such as calling during times their not allowed, harassing, etc, then bring it to a supervisor’s attention, and you can generally come to a more favorable agreement for yourself. If the supervisor does nothing, you can then look into taking legal actions.

  • Trevor G

    There is one point that should be added to this comment which was very good. You can demand that all phone calls cease under the act and ask that everything be sent in writing to your address.

    Send this letter by registered mail so someone has to sign for it. Once they receive it they have 72 hours to comply. If they fail to comply they will including the person barred from collecting from you and in some cases the debt will be cleared.

    Another valued obtion is go to your local credit bureau they often are collection agents as well. They can assist you in repaying debt or debts in a timely matter usually on a monthly basis at an amount that you can afford based on your income.

  • Ricki Rodriguez

    I have a question about my credit. I had a Sears account and Sears Master Card that was canceled in August 2007. A company called me about collections, I was in a panic. I called sears about the company to find out if they were legitimate. Sears could not give much information but confirmed that they do work with that company. The company was easy to work with and I paid my debt for my Sears Card and Sears Master Card in 2 payments.
    The only thing is when I was done paying the company gave me a conformation number BUT no statement. I did call Sears and of course not to much info was given to me how ever It did seem legitimate. (that was the end of 2007)

    In 2009 a collection company started calling me about my Sears Card, They called me between 30 to 40 times a day even on weekends. I told them that I already paid my debt over a year ago. They threaten to tell my job, they threaten to call my husbands work, they told me that they will contact my family…. they were so upsetting that I even cried. I had NO one to turn to about this NO one to contact for help, I gave-in and set up a payment plan with them Only with one condition that they send me a statements so I may have some sort of evidence that I paid.
    Three things happened they sent me a statement… then they called and made a deal with me about the amount I owed and the harassing phone calls continued, even when I made a payments.

    So I paid a big payment then smaller payments for 4 months. At the end of that, I told them that my husband who worked part time wasn’t going to work in the summer that I can continue to pay them in September… they said they understood, however i made two small payments after I talked with them .
    In September I called them to start up my payments again, However I told them Im NOT going to pay unit then send me a statement ( I only received 1 statement in the beginning but noting to show that i had made any payments and I was little more then halfway done. They told me that they were going to do that by mail and email. I paid a bigger payment and waited. NOTHING…..I called them the end of October and told them I still haven received a statement… the man I was dealing with the whole time got really up set and started saying that he was going to contact my job if I don’t start paying. I was really confused. HOWEVER I paid over the phone…. After that it got really bad with the harassing. I didn’t pay in November or December I was trying to hold my ground.

    In January they called me as if they never talked to me before … THEN and statement came in the mail from the same company that was the same amount of money that I started with as if I nevered pay a thing ( February). The campany with out telling me took a small payment out of my account in January.
    I contacted them and he said that I needed to pay $400 dollars that day or else… I had only $200 left the agreement he and his boss made with me, he was floored and said that he had access to my account anyways.
    I hung up and my Husband called him and told him that we will give him $200 right now if he can email us the receipt… HE refused. we put told my bank to block that company. The company called a couple times, i told them I will give then the $200 left on my account or nothing and they refused, they stopped calling.
    About 2 and a half years later I’m starting to get calls again from anther company trying to collect… NOT the $200 i offered NOT the $400 they wanted BUT the full amount.
    A friend of mind had a similar situation and talk to her lawyer. The Lawyer gave her the advise not to have any contact with the collection agency and that after 6 years it will be off her record.
    What do I do? So do I have right?

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