How to Deal with Debt Collectors
If you've ever gotten a phone call from a collection agency, or if we're being honest, several phone calls, since there's never just one, you know how scary the experience can be. Not only do you owe a potentially large sum of money, but your credit report may also be in shambles. It can be hard to maintain your calm in the face of that kind of stress!
But once you learn a bit about how debt collection works and what's motivating this company to endlessly hassle you, the whole thing gets less frightening and much easier to deal with. Here are our best strategies for dealing with debt collectors, and what you need to know to avoid getting taken for a ride.
What happens when an account goes to collections?
Collection agencies want your money, of course, but they're legally required to verify the debt they're seeking. And although their representatives are trained to sound intimidating, the truth is, they don't have a lot of power over you. The item's already on your credit report, so the ball's in your court. (Occasionally, they'll offer to have it removed for you, but may charge you an additional fee for this “service.” You can just as easily file a dispute directly with the credit bureaus after you deal with the collection agency itself.)
What's more, by the time your account has gone to collections—usually after 60 to 180 days of non-payment—the original lender has basically given up on ever receiving your debt. That company sold your debt, for a fraction of what it's worth, to the collection agency, which in turn makes its money by scaring you into coughing up the dough.
Often, the collection agency doesn't actually have all the information it needs to verify you ever owed the debt in the first place. And if they can't produce the necessary documentation, they're legally required to leave you alone.
This means all you have to do is prepare yourself to deal with collection agencies ahead of time, and know exactly what to say and do when they call.
What to Do When a Debt Collector Calls
If you're receiving phone calls from a debt collector, you know how tireless and discouraging they can be. Debt collector phone reps use carefully designed verbiage and scripts which are meant to make you feel guilty and afraid.
But don't forget: you're the one in charge. The agency is trying to get your hard-earned money, and all they did was buy your debt from the original lender for cents on the dollar. So stay calm, buck up, and divulge as little information as possible. Instead, demand that they give information to you. And never, ever agree to a payment plan or make a payment on the spot without asking for a debt verification letter in writing!
Collection Call Scripts and Responses
When a debt collector calls you, it's your chance to ascertain the information you need to figure out whether you actually do owe the debt. This will give you the ammo you'll need to file a dispute if it turns out to be illegitimate.
Here are the details you should get from the collections representative while you have them on the phone:
- The exact amount of the debt
- What type of debt it is
- When and where it originated
- The full name of the collection agency (and the individual representative)
- Where and how they got your information
If you're receiving multiple calls, ask for—and mark down—this information every single time. The rep may try to pressure you into making a payment or agreeing to a payment plan; do not allow them to intimidate you. They are legally required to verify the debt, and you don't have to pay a single cent or divulge any personal details until they've provided a debt verification letter.
Also, remember that it's okay to hang up on the representative if the conversation is getting heated or you simply don't want to talk to them anymore. You can also explain that it's not a good time to talk and request a phone number to call back when you're ready.
Know Your Rights: Debt Verification and the Fair Debt Collection Practices Act
A collection agency must be able to provide written verification of your debt to legally pursue payment. (And remember: the agency may not have the information they need to do so, even if the debt is legitimate, since the original lender is no longer invested in your repayment.)
So, either on the phone or by mail, request a written debt verification letter from the agency before agreeing to any sort of repayment strategy. You can also request that all further communications take place via mail only, to avoid those frustrating phone calls.
Fair Debt Collection
Thanks to the Fair Debt Collection Practices Act, collectors are barred from using “unfair” or “unconscionable” actions to collect, or attempt to collect, any debt. Their communications with you are also limited by guidelines laid out in this law, as well as requirements about debt verification.
Here are just a few of the rights you have when dealing with debt collectors:
- Collectors can't call you before 8 a.m. or after 9 p.m. in your time zone, though they may send text messages or emails during that time.
- Debt collectors must honor written requests to cease contact, or to shift contact to certain avenues (i.e., no phone calls at work or written communications only).
- Debt collectors can't make threats against you, either of physical violence, arrest, repossession of your property, or lawsuits. Neither are they allowed to verbally abuse you or use foul language or insults in their communications.
Collection agencies are also legally required to identify themselves to you plainly. If the person on the other end of the line puts up any sort of resistance to your informational requests, you could be dealing with a scam artist. Always protect yourself by asking for communications and debt verifications in writing to avoid giving a con artist a payday.
Can a Collection Agency Garnish Your Wages?
Even if you're feeling confident about your communications with the collection agency, you may be wondering if they're allowed to garnish your wages, especially if they're making threats to that effect over the phone.
While some states do allow debt collectors to garnish wages, it isn't the norm. Furthermore, only certain types of debts are eligible for wage garnishment. Either way, the creditor would have to obtain a judgment against you to pursue wage garnishment, which would require a valid court order.
Debts Eligible for Wage Garnishment
Here are the types of debts that are eligible for wage garnishment:
- Child support and alimony are the most common types, and most states allow wages to be garnished for these purposes. Depending on your specific circumstances, up to 60% of your disposable earnings may be garnished for child support payments.
- If you owe back taxes, federal, state, and local governments can garnish your wages, and they don't need a court order to do so. Your deductions and dependents will determine what percentage of your income can be garnished.
- Federal student loan debt is subject to wage garnishment, but it's limited to 15% of your disposable income.
In the majority of cases, a collection agency must file a lawsuit against you to start garnishing your wages, and the legal process takes time and effort. In other words, don't let a debt collector scare you with threats of wage garnishment because they're most likely bluffing.
Removing a Collection Account From Your Credit Report
Obviously, in an ideal scenario, you won't have to worry about a collection account showing up on your credit report. But if you're receiving calls from collection agencies, chances are it's already there. It'll stay for the standard seven years if you do nothing.
If the collection account is truly illegitimate, you can open a dispute directly with the reporting credit bureau, which will run an investigation on their end. If they determine the account is, in fact, fraudulent, they'll remove it from your credit report immediately. If the collection agency is unable to validate the debt, this may help your case.
Disputing with the Original Creditor
You can also file a dispute with the original creditor, which gives you the opportunity to bypass dealing with the collection agency. In order for this tactic to work, you must also dispute the account with the credit bureaus themselves.
Finally, it is possible to negotiate with the collection agency itself, such as agreeing to pay a lump sum (which is significantly lower than the requested total) for them to remove the debt from your credit report. However, if possible, it's preferable to find ways around dealing with the collection agency directly.
Improving Your Credit Score and Maintaining Good Credit for the Future
After dealing with a collection agency debacle, your credit score may have taken a hit. But if you've taken the steps necessary to negotiate with the agency and resolve the issue, you can look forward to rebuilding a positive credit history.
With time and persistence, positive credit activity (such as paying your accounts in full and on time or reducing your overall debt burden) can help bring a tarnished score back up into the “good” or even “excellent” categories. Credit repair companies can help turn this lengthy process into a shorter, easier journey. Here are a few of the best on the market to choose from.
No matter how you resolve your current credit woes, however, be sure to monitor your credit going forward, by taking advantage of your free annual credit check or using a credit-monitoring service through your credit card issuer or bank. The best way to deal with collection agencies is to avoid them altogether, and the earlier you know about a negative or delinquent item on your history, the better your chances of keeping it from going to collections.
