6 Important Things You Need to Know About Debt Collectors
Before committing any part of your monthly budget to paying down collection accounts, it's important to have a complete understanding of what your household budget actually is and what you can truly afford. We speak to people every day who make promises to debt collectors that they simply cannot keep. A budgeting session with one of our counselors is free and it can really help you get a full understanding of what you can and cannot afford before making any type of payment commitment.
6. Monthly Payments Aren't the Only Option
When it comes to settling collection accounts, you may be tempted to hire a company rather than do it yourself. Before you do that, I recommend you find out what debt settlement companies don't tell you. Hiring a professional negotiator can often feel like the right solution, until you calculate the costs that come with the help.
How to handle a debt collector demanding payment on the phone
Getting calls from debt collectors can be a difficult event in your life. It could be a sign that you are behind on payments, the victim of identity theft, or it could be a mistake on the part of the debt collector. In addition, debt collectors can be rude, pushy, and insulting when trying to collect the debt(s) they claim you owe.
Debt collection agencies, and their employees, get paid to collect the debt they’re calling you about, and in many cases, they don’t care if the debt they claim you owe is accurate or not. If they can get you to pay over the phone, they will do so.
Follow these lists of Dos and Don’ts when contacted by a debt collector.
If you’ve been contacted by collections agencies before, or you expect that to happen soon, be prepared. Know what you are going to say before the debt collector calls. This way, you are less susceptible to bullying, and you can steer the conversation toward a conclusion.
Get the collector’s name, phone number, company address, and company name. For one thing, you may need to send them documentation, payment, or other materials. For another, you may want to do some research into the collector. A legitimate company will have no problem supplying you with this information.
Under the Fair Debt Collection Practices Act, debt collectors are required, within five days of contact, to send written documentation that includes the debt amount and the creditor who is claiming the debt and next steps on payment or disputing the debt.
Once you have received the debt collector’s documentation, you can do one of two things: either pay up, or dispute the debt. If you decide to pay, you can organize your payment directly with the debt collector. If you wish to dispute the debt, you must do so in writing within 30 days of the first collection letter. Once disputed, the debt collector must provide documentation of the debt from the original creditor.
You should check to see if this debt is reflected within your credit report. If it is, it almost certainly will damage your credit score. If you are investigating the credit report listing, you should do so with the credit bureaus as well—a credit and debt expert can help you through this process.
Don’t assume that the debt collector is in the right, and don’t allow them to convince you to pay immediately over the phone. You could wind up paying a debt you aren’t actually responsible for, and since the debt collector is required by law to validate this information, you may as well wait until this happens.
Debt collectors often take a rude and threatening tone to get what they want. Don’t let them push you around. It’s illegal for them to use obscene, abusive language, or to continuously call and harass you. If you request in writing that they cease communication, they are required to do so. (This is not a fix to make your debt go away, but it is a fix to get them to stop calling).
Unpaid debt can have negative consequences on your credit, which in turn can negatively affect other aspects of your life. Determine if the alleged debt is valid or not, and then take action. Don’t ignore the situation.
If you decide to pay the debt collector, do so with a check or other payment method under which you designate the amount of the payment. Do not provide your bank account information. If the debt collector withdraws too much money (either unintentionally or otherwise), it’s very difficult to get your money back. Also, don’t provide any debt collector your Social Security Number (SSN) or other personal data. They should already have what they need.
Again, if you decide to pay, you don’t necessarily have to pay the entire amount of your debt up front. First, the amount owed can often be negotiated down. Second, since debt collectors make money if and when you pay, they are frequently willing to work out a payment schedule that works for you. If you can negotiate such a schedule, do so, and make the payments in full and on the schedule you agreed upon.
Getting a call from a debt collector can be a stressful experience, but by understanding your rights, and the actions you can take, you can at least make the event a less painful one. Follow this advice to ensure that your debt collector is legitimate and to address the issue so that you can move on with your life.
Seven questions that will help you sniff out a debt collector scam
A “debt collector” call can arrive at any time for just about anyone. Even if you’ve never missed a payment on a bill. There’s only one way to protect yourself: Know what questions to ask.
Debt collector telemarketing scams are incredibly persistent because they work. “Debt collectors” can sound scary, and when they catch consumers at the right time, they can quickly trick people into paying up before they realize what’s happened.
The IRS has issued near-continuous warnings about the taxman flavor of this scam for years.
“Taxpayers across the nation face a deluge of these aggressive phone scams,” IRS Commissioner John Koskinen said earlier this year.
These scams work because fake debt collectors have a huge advantage over other kinds of telemarketing scam callers: You really can’t just hang up on them. Even if you are sure you’ve paid all your bills and taxes on time, a call about a debt could be an important warning signal that your identity has been stolen or some other foul play is at work. So it’s unwise to simply hang up on a debt collector. You should stay on the line long enough to get answers to the questions posed below.
Of course, many fake debt collectors aren’t randomly dialing victims. They are working off lists that make it more likely they hit a decent “mark.” Online payday loan lead generators are known for selling consumers’ personal information to scammers, even if the consumers don’t ultimately take out loans. Why? People who look up payday lending information are much more likely to be in some kind of financial trouble, and ripe for the taking. Similarly, consumers with old debts that are no longer collectible (every state has a different statute of limitations on debt collection) often receive phone calls from collectors hoping they can talk consumers into paying up anyway.
Whatever the circumstance, here are the questions to ask anyone who calls claiming to be a debt collector. They’ll help you sniff out potential scammers.
1. Who are you? Who do you represent? What is your direct telephone number? What is the address?
If the caller is at all squeamish about sharing his or her name and full contact information, that’s the biggest red flag of all. Don’t continue any conversation with anyone who won’t answer these questions. Do repeat them several times, as any contact information you can get – even partial information – might be useful to you in any legal action later on (such as a Do Not Call lawsuit). You can learn more about your debt collection rights here.
2. What is your professional license information?
Many states require debt collectors to be licensed. This is the easiest way to verify a collector’s identity. Take the information provided, and double-check it with your state’s authorities online – don’t just take the caller’s word for it.
3. What is the name and address of the debtor you are trying to reach?
That might sound obvious, but it’s not always the case. A “cold call” scammer wouldn’t have this information, for example.
4. Can I call you back in a few minutes?
After you get this information, it’s probably a good idea to hang up and call back. This will verify that the contact information is accurate, and will often trip up scammers who are lying about their location – if the call is coming from overseas, for example, but spoofed to appear local. It also gives you a moment to stop and collect your thoughts.
5. What is the amount of the alleged debt and who is the current creditor?
The current creditor should be the party calling. Be sure to ask for specifics, such as: What was the original amount, and what is the breakdown of other fees that have been added?
6. How can you seek verification and validation of the debt?
Debt collectors do not have to provide debt specifics during the initial call, though they often will. Collectors legally have five days from initial contact to supply it. This legal process, defined in the Fair Debt Collection Practices Act, is called “verification.” Simply asking, “How can I request written verification of this debt,” and getting the paperwork in hand, is good practice. (A sample debt verification letter is here). The process is also called “validation.” Any legitimate collector will not balk at requests for verification or validation.
7. How can I dispute the debt?
Disputing a debt initiates another legal process that requires collectors to produce additional documentation supporting its right to collect, such as paperwork from the original creditor. No one should ever pay a debt bill to a firm that can’t produce paperwork supporting it.
Remember, it’s a good idea to regularly check your credit for any errant or erroneous debt information. You can get your credit reports for free once a year at AnnualCreditReport.com and you can find out how the information they contain affects your credit by checking your credit scores. (You can get your credit scores for free on Credit.com, updated monthly.) If you discover your credit report contains erroneous information, dispute it, but give yourself plenty of time to get the item(s) corrected and the dispute resolved before you apply for a mortgage, car loan or credit card.
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