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Key takeaways
- Before taking any action, request information about the debt from the collector and verify that it is yours.
- Get all agreements and settlements in writing to protect yourself from potential scams.
- Understand your rights under the Fair Debt Collection Practices Act and report any violations to the proper authorities.
Getting a call from a debt collector can be frustrating and overwhelming. But if you receive a call from a collection agency, don’t panic. Pause and make a plan to protect yourself, handle future calls and pay off your debt.
It’s important to know your rights when it comes to debt collection. Knowing exactly what a debt collector can and can’t legally do allows you to effectively handle debt collectors.
5 ways to deal with debt collectors
If you’re dealing with a third-party debt collector, there are five steps you can take to handle the situation.
1. Be smart about how you communicate
Debt collectors will continue to contact you until a debt is paid. Ignoring debt collectors pursuing valid debts can damage your credit score and report.
You should listen to them, but don’t volunteer any information during any initial communication. Don’t confirm that a debt is yours, and don’t share any information over the phone. Keep your ears open, and keep a record of the conversation for your reference.
2. Get information on the debt
Without admitting the debt is yours, get information from the debt collectors, before you make plans to deal with it. The collector must legally tell you information about the debt in question.
The information the collector shares must include the original creditor’s name and contact information, the amount of the debt, when the last payment was made and what you can do to dispute the debt. If the collector doesn’t offer this information at first contact, it must provide it in writing within five days of initial contact with you.
Certain consumer debt has a “shelf life” in which a creditor or debt collector can legally sue you for the debt. This is called the debt’s statute of limitations, which varies by state and type of debt.
If the statute of limitations has expired, the debt collector can no longer sue you to recoup the debt. Admitting a debt is yours may reset the clock on old debt, so never confirm, even if you know the debt is yours.
3. Get it in writing
Legitimate debt collectors are required to send you a letter in the mail detailing your outstanding debt that includes all of the previously mentioned information. You should also get details about how to dispute the debt, which can come in handy if the debt in question isn’t yours. Quick tip The debt notice is an important requirement that ensures your consumer rights are preserved. If a debt collector doesn’t give this information by the required date, but keeps contacting you for collection, you can pursue legal recourse.
4. Dispute a debt that isn’t yours
If you don’t think the debt is yours, send a written dispute letter within 30 days. At this point, the collector is legally required to discontinue communication and collection efforts, until it provides you with a written verification for the debt.
Make sure you date your dispute letter, keep a copy for yourself and maintain proof it was sent. For example, mail it via Certified Mail — or if faxing your letter, retain the fax confirmation indicating the time and date sent.
5. Try settling or negotiating
After you’ve received your letter and verified the debt is yours and still within its statute of limitations, see if the debt collector will settle for a portion of the cost if you pay immediately. If the collection agency wants the full amount due, ask if you can set up a payment plan. Quick tip Get the settled or negotiated amount and payment terms in writing before initiating any payments or providing payment information.
How debt collectors get your information
When you haven’t paid a debt to a creditor, it may sell it to an agency or hire an agency to collect the debt on its behalf. The responsibility of collecting the debt then falls to the collection agency.
The creditor will likely pass along some of your personal information — like your address and phone number — so that the collection agency can contact you. If this information is incorrect, the agency may also try an internet search to find your current contact information.
If a debt collector got your information from the original creditor, it will have your personal details, the amount owed and the company you originally owed. If you’re dealing with a legitimate debt collector, it should have no problem sharing information related to your debt.
Common reasons for consumer complaints against debt collection practices
According to the CFPB, the primary complaints against debt collectors include:
- Efforts to recover debts that are not due, commonly as a result of identity theft.
- Problems with obtaining the necessary written debt notifications in line with the Fair Debt Collection Practices Act (FDCPA).
- Intimidation, including misleading threats of lawsuits or arrest.
- Dishonest statements and misrepresentation of debts.
- Inappropriate communication strategies that breach the Telephone Consumer Protection Act (TCPA).
- Undue threats to get in touch with third parties or disclose information that could cause embarrassment to the consumer.
Understand your rights when dealing with debt collectors
In accordance with the FDCPA, The Federal Trade Commission ensures all debt collectors follow certain debt collection laws. It’s important to be aware of these laws to stand up to any debt collector that violates your rights.
- They have rules for contacting you. Debt collectors are limited on when they can call you — typically, between 8 a.m. and 9 p.m. They are not allowed to call you at work.
- They can’t lie or harass you. Debt collectors can’t make you pay more than you owe or threaten you with arrest, jail time, property liens or wage garnishment if you don’t pay. Wage garnishment might be legal in your state, but your debt collector will need to take you to court first.
- They must provide you with information about your debt. They have to tell you a few key facts about your debt. This includes how much you owe, who the original debt was owed to and what you can do if the debt isn’t yours.
If you feel like any of your debt collection rights are being violated, you should report the debt collector to the Consumer Financial Protection Bureau or your state attorney general.
Common mistakes people make when dealing with the statute of limitations
A frequent misunderstanding related to the statute of limitations on debt relates to the initiation point. Contrary to the popular belief that it starts when the account is first opened, the clock actually begins ticking when a payment is missed or the final payment is made.
Another common mistake is unknowingly resetting the clock on old debt. This happens when you make a payment or agree to a payment without researching the terms of the debt. Doing so basically restarts the repayment time frame of that old debt all over again. That said, ignoring legal notices can result in judgments that give collectors additional tools to recover the debt owed, like wage garnishment.
How to spot a debt collection scam
Having debt can mean you are open to debt collection scams, but you could encounter scams even when you do not owe anyone money. To make sure that a debt collector is legit and avoid debt collection scams, keep an eye out for the following signs.
- Watch your mailbox. A validation letter is one way to make sure you’re dealing with a legitimate debt collector. If you only received a phone call from an alleged debt collector, request a validation letter.
- Verify your details. Even if the company is legit and the debt is real, there’s a chance the obligation may not be yours. It could be the debt of someone who shares your name, or it could be from an act of identity theft.
- Make sure you can pay the way you choose. If the person on the phone claims you can only pay immediately through a wire transfer or a prepaid debit card, you are likely dealing with a scammer.
Bottom line
Knowing the steps to take if you get a call from a debt collector can help you deal with it effectively. There are rules that debt collectors must follow to collect payment on old debt, and knowing your rights as a consumer will help you properly handle the situation.
That said, debt collection is an issue that shouldn’t be ignored. If the debt is legitimate, but you are unsure whether it’s past the statute of limitation, contact a lawyer or a finance professional to advise you on the steps to take before taking any action or engaging in further conversations with debt collectors.
