Hopefully, you don’t have any credit accounts that are in default. But, some of you may have recently seen the light about changing your finances, and now you’re trying to clean up your past. Part of that cleaning up may involve dealing with bill collectors. Bill collectors have one of the worst jobs in the world. It is their job to collect money from people that don’t have any money. Collectors have made a very bad name for themselves in the past few decades, because they have been known for their harsh collection practices. In fact, their treatment of customers was so bad, that it spawned a federal act to be drafted called the Fair Debt Collection Practices Act. This act gave more rights to the consumer and restricted collection agencies from certain practices. It basically stopped collection agencies from acting like monsters and gave consumers a legal argument against the way bill collectors treated them. If you are not familiar with this act, please click on the link above and read about your rights as a consumer and the rules and regulations that collectors must follow in order to fairly collect the debt you owe.
There are many different types of bill collectors out there. There are collectors who work for the company collecting the debt, collectors who work for a third-party agency trying to collect the debt for a certain company, and collectors who buy old debt and try to collect it to make a profit. Each collector has their own style for collecting a debt. You need to make sure that their style does not violate the regulations set for in the FDCP Act.
Staff Collection Representatives: You will typically find that staff collectors are a little easier to work with than the other two types of collectors. They need to represent the company in a good way, and they might be willing to work with you to set up a fair debt collection plan. If the debt is between six to twelve months delinquent, then you’ll typically deal with a staff collector for major credit card companies, mortgage companies, and other secured debt like a car loan. These people will be firm on what they want to collect from you, and they will be reluctant to settle for less than the debt is worth. It’s extremely tough to settle for a percentage of a debt that is less than a year old. However, you can usually work out a payment plan with staff collectors. This is not to say that you won’t find bad seeds. Sears credit agency has been notorious for having very harsh collection practices.
Third-Party Collection Agencies: Again, you’ll run into these collectors when the debt hasn’t been delinquent for very long. Many credit card companies, cell phone companies, and utilities companies will pay a third-party to handle their debt collection. It’s important to remember that the debt is still owned by the original company that you owe money to, but a third-party is acting to collect the debt on their behalf. I’ve found that these collectors can be a little more pushy and rude than staff collectors. They will abide by the FDCP Act for the most part, but they tend to push the limits. They are usually reluctant to work with you. They’ll accept your partial payments, but they’ll rarely work out a payment plan with you in writing.
Primary Collection Agencies: If you find yourself in a situation trying to negotiate with a primary collection agent, then you most likely forgot that you owed money or really let your debts go for a long time. Typically, when a delinquent debt gets to the three, four, or five year mark, companies will sell off their old debts for pennies on the dollar to these collection companies. These are the bottom feeders of the industry. Don’t ever believe a word that comes out of their mouth. They will definitely push the limits when it comes to their style of coercing you into paying the debt. They are typically pushy and rude. However, if you play your cards right and deal with how rude they will come across, you may be able to work out a settlement with them. If they bought the debt for 25 cents on the dollar, then they are probably willing to accept 50 cents on the dollar as a settlement. But, they won’t agree to this right away. You have to really do a good job of convincing them that you don’t have the money or assets to pay the debt in full.
Things To Remember When Dealing With Debt Collectors
- Always get agreements in writing. If you make any agreements or deals with a debt collector, make them put it in writing, or else you might as well not consider the deal. All types of collectors are notorious for breaking their word, and people get burned all the time thinking that collectors will stick to what they verbally agreed to in terms of collecting a debt.
- Never allow electronic access to your checking account. If you give a collector electronic access, they will wipe your bank account clean until they’ve received the full balance of the debt. Even if they say that they won’t do it, they will.
- Never let a collector bully you into paying a debt. You hold the checkbook, so you set the terms of repaying the debt. They will try everything in the book. They will try to make you feel like a horrible person for being delinquent. If they ever threaten you in any way, hang up immediately and write them a letter stating that you will sue them for a violation of the FDCP Act if they do not abide by its rules. Send the letter by certified mail.
The moral and ethical thing to do is pay off all old debts. However, if you truly don’t have the money, then you don’t have the money. Don’t ever pay an old debt when it means that you won’t be able to feed your family for the month or pay your mortgage/rent. They took on the risk by extending you credit, so always pay for necessities first, then anything extra goes towards paying off outstanding debts.
If you have any other questions about a specific situation, you can contact me to discuss it.