As our economy continues to tighten many people will find it more difficult to manage their debt and eventually some will be have to deal with collection agents. Credit card debt is usually unsecured, that is, there is no collateral held against the debt. If consumers don't pay, creditors can place negative remarks on their credit reports but they cannot touch assets without taking legal action. Most often, creditors merely call it a loss and sell off old unpaid debt to a collection agency.
The creditor may be done with the account but for the consumer, the ordeal is just starting. If you find yourself in that position, knowing some simple truths about the coping with collectors can make this time less stressful and can help prevent you from making costly mistakes.
Open your mail. You will officially know what is going on with your account by mail. As companies give up on their ability to collect from you, they will transfer, actually sell, your account to another agency--often for pennies on the dollar. They must officially let you know when your account has been transferred. This is done through the mail. To address the debt, you need to know whom to contact. Additionally, every time your account is transferred it is actually worth less to the collection agency which translates into more negotiating power for you.
Answer the phone. Ignoring the phone only makes them call more often. When you speak to an agent, don't argue, don't whine about your situation, and don't plead your case. It won't do any good. Collection agents are on commission. They are interested only in money. They hear the same reasons and/or excuses all day, every day. They are not interested in your special circumstances and can do next to nothing to help you make it better.
Collectors are relentless. They will call you on your cell phone, call you at home or call you at work if they have the number. If you would rather not deal with telephone calls at all, confirm the address of the agency and send a letter stating that they may only contact you by mail. Get a return receipt for the letter you send. You may need to do this every time your account is sold to another agency.
On the phone, be nice but firm. Working in collections is one of the most difficult jobs in the world. Collectors spend their whole day talking to fearful, angry, bitter, stressed and evasive people. Being pleasant and polite to them will make the conversation easier for both of you. Calmly assure the collection agent that your intention is to pay your debts in full when you have the money to do so. When they pressure you to make arrangements to pay, simply reaffirm what you have already said and apologize for not being able to do more at the present time.
Never mention bankruptcy. To a collection agent, bankruptcy means you have no intention of paying your debts.
Don't make promises you can't keep. Many of people will make promises to collection agents just to end the unpleasant call. Broken promises only result in more aggressive, less cooperative behavior from collectors. This is why it is better to avoid setting up payment schedules. The one thing you should always say to a debt collector is that you intend to pay your debts in full when it is possible to do so. Refrain from elaborating.
Don't believe what you hear. Collectors know more about the rules than you do and they are not going to educate you on your rights. They are going to say whatever it takes to get you to pay. They are trained to phrase what they say to you to be convincing, to catch you in lies and back you into a corner. They choose their words carefully and want to elicit an emotional reaction from you. What you hear may not be what the agent actually said and your response could make things worse.
Collection agents will threaten damage to your credit report. Point of fact, if your account is in collections, your credit report is already damaged pretty badly. Your first goal is to fix your finances so that you can begin to rebuild your credit. Temporary solutions just prolong the problem.
Nearly every letter you receive from a collection agency will indicate that you need to respond immediately to prevent possible legal action. If a collection agent mentions legal action, restate your intention to pay your debt in full and, if necessary, you are prepared to go to court and explain your intention and your situation to a judge. In the event that legal action is taken, show up with your documentation and, if you can afford one, a lawyer. Failing to appear will result in an automatic judgment against you that includes thousands of additional dollars to cover legal expenses.
Don't send post-dated checks. It is illegal for you to write checks when you do not have the money in the account to cover them. Writing post-dated checks is not only illegal; it can result in all sorts of problems. You will almost certainly bounce checks and jeopardize your checking account as well as your credit report. You will face overdraft fees from your bank and returned check fees from the collection agency.
Keep records. You should keep a separate file for each account. Keep copies of all the letters you send and receive. Take notes every time they call. Write down the name of the person, the date, time and duration of the call and what was said. If you can, record the call itself. You have to advise them that you are doing so before you press the record button and then confirm that you are recording the call just after you start recording asking for their spoken permission to record the call.
If you have money, you can negotiate. Keep in mind every time your account is transferred or sold to another agency, they have paid far less for that account than its face value. If they are going to sell your debt to someone else, why wouldn't they sell it off to you? You can negotiate with a collection agency for a lower amount. They won't like it. They will resist. They will say that what you want is not possible. But they do it all the time. Do not send any money until you have a written agreement that the amount you send will be recognized as payment in full, that no balance will be transferred or sold to another agency and that the report to the credit reporting agency will state that the account has been paid in full.
Educate yourself. The Federal Trade Commission produces a number of publications that explain consumer rights. The Fair Debt Collection Practices Act is available free in PDF format on their website. ftc.gov
Get Help. Speak with a certified financial counselor. A reputable financial counselor will be able to explain a wide range of options and their unique conditions and consequences for resolving your debt situation.
You are invited to visit integrityhpi.com integrityhpi.com and subscribe to weekly Tips for a Balanced Life. Joseph Onesta, M.A. is a speaker, trainer and coach working in the field of Human Performance Improvement, consulting with organizations and individuals to improve their performance through focused strategies, enriched work/life balance and enhanced communication. He is also the former Director of Education for Consumer Credit Counseling Service of Los Angeles and has helped thousands of consumers confront, remedy and prevent financial difficulties.
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