The Frugal Creditnista

7 Tips for Dealing with Debt Collectors

Tips for Dealing with Debt Collectors

Have an unpaid bill in collections?  Knowing the steps to take is crucial to avoiding more aggressive collection activities.  Here are 7 steps to take when a debt collector contacts you:

Step One

Don’t Panic! Receiving that letter in the mail or that daunting phone call can send shock waves through your body.  Just keep in mind that a debt collector wants nothing more than to see if you have the ability to pay the debt.  Your job is to not give this information to someone who has called or written you out of the blue – no matter what they say!

If over the phone, keep the conversation short: “I don’t handle financial matters over the phone.”  I’m not in a position to talk right now” and ask for them to send the information in writing.  YES, provide them with your mailing address, and send them a cease & desist letter to limit communications to the mail.  END THE CONVERSATION!

Remember, if it’s your first-time hearing from the collection agency, per the Fair Debt Collection Practices Act, they must send you a written notice in 5 days of that phone call telling you how much you owe, who the original creditor is and what action to take if you feel you don’t owe the debt.

Step Two

Check Your State’s Statute of Limitations (SOL). This is a law that sets the amount of time a creditor has to sue you for payment of a debt.  It varies per state.  If the debt has passed the statute of limitations, any threats of suing you or garnishing your wages are futile attempts to scare you to pay.  Don’t fall for it.  If it has not passed, or it’s a newer collection, the collector may have more leverage and you may need to settle the account if they can properly validate the debt (especially if it was assigned). If it’s past or very near your SOL you have the upper hand, and the ability to walk away completely. Simply send a letter pointing out the debt is past SOL and to cease and desist all communications with you.

Step Three

Check Your Credit Report.  Are they already reporting the debt on your credit report, and does the information on the letter they sent you (if applicable) the same as what’s showing on your credit report.  If not, dispute for inaccuracy.  Check to see if the dates, the balance, the name of the original creditor, the comments, status, payment history, etc. are correct. You’ll dispute whatever inaccuracy is reporting, requesting a deletion.  Wait 30-45 days for a response.

Step Four

Google the Company. You always want to know who you’re up against. Are they known to violate FDCPA guidelines? Do they sue at the drop of a hat? Are they known to settle right away? Are they known to remove items from credit reports with payment? All of this information can be found on various credit forums such as myfico.com, creditboards.com, creditinfocenter.com, debt attorney blogs, consumer rights attorney blogs and more.

Step Five

Send them a Validation Letter.  On the initial letter, the collection agency will inform you of your right to dispute the debt in writing.  This letter does that. If you found out about your collection account on your credit report, you may still send a validation letter, using the address listed on your reports to send it to.  Wait 30-45 days for a response.

Don’t forget to review your Federal and State Collection Laws. An educated consumer is a powerful consumer! Adjust your validation letter to include both federal and state requirements (Google {your state} Statute of limitations on Debt for more info).

Step Six

Review the collection agency’s response to your Validation Letter.  Did they provide you what you need to prove that the debt is legit and you owe them?  Keep in mind, validation documentation should NEVER come from the collection agency; all documentation should be on original creditor’s letterhead/forms. The collection agency should be giving you what the original creditor gives/gave them. Determine if:  You should send another letter giving them a second attempt at validating the account?  Send a letter telling them to cease and desist all communications and collection activities until the account has been validated according to federal and state regulations?  Also send a dispute letter to the credit bureaus to get rid of the account due to insufficient validation? Send a letter to the original creditor to see if they have any information regarding the account?

Step Seven

Settle the account, ONLY if they have fully validated the debt.  You can see if they will accept a payment in exchange for deletion, otherwise, settle and attempt to dispute after payment for removal.  (I don’t pay collections in full unless they are offering a full deletion from my credit reports).  Get ALL payment agreements in writing before any money leaves your account.  NEVER give them your account info over the phone; send them the payment. Keep in mind, the collection agency’s job is to get as much money out of you as possible; your job is to do the exact opposite.  NEGOTIATE!

Hope this helps ?

For more information on how to tackle your collection accounts, grab my Amazon best seller Stop Hiding!  10 Proven Strategies for Facing Debt Collectors Head One

For a more personalized game plan, schedule a 1-on-1 consultation with an experienced Credit Specialist here.

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