Dealing with debt collection agencies is one of the most frustrating lots in life. Most everyone has to deal with them. Even people who don’t have legitimate debts probably have to deal with credit agencies from time to time. We’ve put together a list of 10 things you need to know when dealing with a collection agency. Know your rights. Don’t think you need to pay the debt off even though the debt is not yours, the amount is not correct, or you just don’t want it to affect your credit score.
Just paying off a collection account that is on your credit report will not make your score go up even a single point. It’s important to note that if you’re being called by an attorney’s office, you are not dealing with a lawyer. Many collection companies will pay an attorney to be able to use their name and law firm to scare people into paying the debt. If they are calling about a debt, they are a collection agency even if they are using a law firm name. Read this list of 10 tips before dealing with any collection agency.
1. Make Sure the Collection Agency is Legit
Sadly, there are a lot of scams out there. Sometimes debt agencies claim they have bought your debt even if it was paid off months ago. Debt agencies can buy zombie debt, too. If you paid off a debt, some collection agencies continue to sell that debt over and over to several different companies to make the maximum amount of money.
Ask the company for their name. Call up the Better Business Bureau to ensure the company is a legit company. Don’t ever give out personal information such as your social security number to anybody over the phone or over email. Google the business name and phone number, try to get as much information as possible before talking to a collection agency.
2. Begin Collecting Information
Debt collectors will try anything to get you to pay up. Your debt might have only been for $30, but they might go after you for $300. Since you might not remember a $30 bill from five years ago, try to track down any information you have on the debt. Make sure you didn’t pay the debt. Log on to your bank account to get photos of cashed checks.
Find out as much information as you can about the debt collection agency to ensure the company is not a scam. Collect as much information up front to save yourself stress down the road.
Ask as many questions as possible to ensure you get as much information upfront as possible.
3. Research Your Documents and Contracts
Try to find your original documents and contracts. Find your original debt collection letter. These are the documents you signed when you first opened your account. There’s a good chance you won’t have these; the good news is that the debt collector rarely has these documents too. These documents are usually needed by one or both parties to prove the debt is legitimate.
Ask for copies of these documents from the agency. Tell them that you need copies either emailed, faxed or mailed to you before you proceed further with any payment. If you continue to receive phone calls without these contracts, tell the agency to stop calling you. If you ask a debt agency to stop calling you and they continue to contact you, this is viewed as harassment by the law.
4. Ask for Proof of Your Debt in Writing
Tell the debt agency to send you proof of the debt you owe. Like the contracts, they probably haven’t received this information from the company you originally owed the money to. A collection acing has to verify the debt they claim you owe within 30 days of receiving a debt validation letter.
Creditors often bank on the fact that people don’t know their rights and don’t know what they owe. They also bank on the idea that people often have a lot of guilt surrounding their debt and can be bullied into paying someone just to get them to stop calling or harassing them.
5. Go Radio Silent
Once you’ve told your debt collection agent all the documents you need before proceeding to the next step, don’t interact with him or her again. Interacting with your agent will show that you’re willing to work and bargain with someone who has not held up his end of the deal. Let your agent know that you won’t be ready to talk again until you get all the verified documents.
If your agent tries to guilt you into talking or threatens you, tell him or her that you know your rights and will pursue legal action if the company contacts you again before you receive the documents.
6. Know Your Rights
The best defense you have against the credit agencies is to know your rights. Credit agencies bank on the fact that most people don’t know their rights and can be bullied or scared into paying up money they don’t owe. There are several things a collection agency is not allowed to do by law.
- They cannot call you repeatedly throughout the day
- Calling before 8am or after 9pm
- Threaten to sue you or use abusive language
- Collection agencies can only speak to you about the debt
- They can’t lie about their identity (call themselves a lawyer or legal assistant
- Try to collect additional interest and fees
- Contact you by phone or mail if you send them a letter stating you no longer wish to receive communication about the debt
7. Find Out If You Still Owe the Debt
Waiting is the toughest part of this game. A credit agency might simply go away. They might continue to send you letters. They probably won’t send you any information stating that they wrongly tried to come after you for a debt.
If you receive proof from a credit agency that you owe a debt, it’s time to move on to the next step in paying that debt. If you don’t receive proof but are still receiving communications or still see that debt on your credit report, it’s time to move on to the next step in getting the agency off your back.
8. Send the Collection Agency to Small Claims Court
If the debt is a larger amount that’s generally over $5,000, send a letter from a lawyer stating you’re ready to send them to court over the manner. If the debt is under $5,000, send them to small claims court. It only costs around $20 to send a company to small claims court, and most companies settle outside of court before the court date.
Simply threatening court action is usually enough to scare a debt collector into leaving you alone. Contact your credit bureau agency and tell them that the debt isn’t valid to remove the debt from your credit.
9. Negotiate a Settlement ONLY if the Collection is Not on your Credit Report
If the debt hasn’t been reported to the credit bureau
If the collection agency has not yet reported the debt to the credit bureaus, work out a settlement. Collection agencies pay pennies on the dollar for your debt from the original creditor. They are always willing to settle for a lesser amount than they claim you owe. Typically a debt collection agency will settle for between 30%-60% of the amount owed. To keep your credit in good standing it’s a good idea to take care of the debt before it goes on your credit report.
If the debt has been reported to the credit bureau
If the collection account has already been reported to the credit bureaus, you have very little incentive to pay. That is, unless the collection agency agrees to remove the account from your credit report entirely. This is known as a “pay for delete” you pay the amount owed and they remove the account from your credit bureau. This is the only way paying a collection account will help your credit score. Paid collection accounts will impact your credit score just as much as unpaid collection accounts do. Just make sure you have it in writing that the agency will remove the account from your credit report when you make the payment.
10. Get Proof of Payment
You need to make sure that other credit companies don’t come after you for this debt and that you never need to worry about this debt again. Since most companies rely on fear to motivate customers into paying, you need to have proof that you’ve paid your debt and that no one can come after you for said debt again.
Keep records of all your receipts, payments and communication with the credit company.
Fight the Collection Agency, don’t fear them
Managing credit agencies can be stressful, but it doesn’t need to take over your life. If you’re worried about debt collectors, know your rights before talking to anyone in person or over the phone. Stand your ground and fight the collection agency. Use the initial phone call to collect as much information as you can about the debt, amount claimed you owe, and all information about the collection agency as possible. Debt collectors have only invested a small amount of money into your past due collection account, the more you fight the less the collection agency wants to deal with you. Using this guide will take much of the stress out of having to deal with debt collector calls.
Randall has over 15 years of experience in the mortgage and credit industries. He spends a chunk of time helping consumers understand their credit, advise them on how to increase their credit, and lending his mortgage expertise to help them find the right type of loan. Randall lives in Dallas, Texas with his two sons.