7 Steps of How to Deal With Collectors

Dealing with collectors. Yuck. This is an article about a topic about as enjoyable as hemorrhoids or an IRS audit. But, alas, it is unfortunately necessary for about 68 million Americans. Collections and collectors themselves can be the result of several different situations. Maybe life happened to you and you fell behind on your bills. Maybe you carelessly overspent and then didn’t pay a bill. Or maybe you changed bank accounts and forgot to switch over one of your automatic payments. Maybe you moved and you or the company didn’t change your address properly. Or (the biggest culprit) you had an unexpected medical bill that you couldn’t pay immediately. Whatever way this happened, you are probably here today because you are being harassed (ahem… I mean called) by collectors. So let’s go over how to deal with collectors the proper way.

(1) What Collectors Are Trying To Do?

As you have probably surmised, collectors are simply trying to collect a debt. They probably have hundreds, or even thousands, of accounts that they are trying to get paid to earn a commission. The objective of a collector is to 

1. Get paid as much as possible.
2. Get paid as quickly as possible.

(2) When Does a Debt ACTUALLY Go To Collections?

If your debt is past due more than 90 days it is likely that it has been sold to a collection agency. It could be as far off as 180 days, but 90 days seems to be the most likely. If it is less than 90 days old, there is a good chance that you can deal directly with the company to which you owe the money.

I can’t stress this enough. It will be FAR EASIER for you to deal with the company that you owe the money to and not a collection agency. But, if you don’t find yourself in that situation, that’s okay. Let’s get it fixed. I’ll show you how.

Believe it or not, creditors (the people that you owe money to) do NOT want to send you to collections. It is really costly to the company and it makes for a big headache for the lender. When you are first getting calls from your lender about your past due balance, they will likely try to work out some kind of arrangement for you to catch up without going to collections. Yes, you might incur some late charges and most definitely added interest, but that is far better than going to collections.

So if you can, work with your original creditor. Once it has gone to collections, it may not be possible for you to go back and work with your original creditor.

(3) Rules To Live By When Talking To a Collector

This is the scariest part for most people. The phone rings from a number that you don’t recognize but you know that it is probably about a bill that is in collections. You get a sinking feeling in your stomach and then you answer it (hopefully). 

There are a couple things to remember when speaking to a collector. The collector is a person just like you. Also, they are just working their job like you work yours. There is no need to be belligerent, ugly, or otherwise rude to them for no reason. Talk to them like they are cohabitants in this world with you. 

At the same time, if the collector is being belligerent, ugly, or otherwise rude to you, you don’t have to take it. Get their name and hang up. (I’ll go over what to do if it gets to this point in a minute.)

Here are the rules for you to remember when talking to a collector:

1. Do not give them any private information like your SSN, employer, income, banking information, etc. If they ask for your current address or email address, that is fine to give them. In fact, they will need this later.
2. Make sure that the debt is yours. OMG this is ridiculously important. I have seen people who have collection accounts on their credit report that they have either already paid off or never owed at all SOOOO many times. In fact this has happened to me one time also. If you HONESTLY do not owe the debt, dispute it on each credit bureau’s website. Tell the collector that you do not owe it and are disputing it. Once you have the dispute approved, then send a copy of the letter or email to the collector.
3. Keep your cool. Do not let the collector get in your head or rattle you. Easier said than done, I know. But once you let the collector aggravate you and make you upset it will be much more difficult to negotiate.
4. Offer to settle the debt if it is legitimately owed. Offer somewhere around 25% of the balance and go from there. I have done this myself and have never settled a debt for more than 50% of what is owed. This may take several conversations with the collector, but it may be worth the hassle if the amount you owe is large.
5. Any settlement that you agree on MUST be in writing. This is the most important part of this process. As a good attorney friend of mine says, “If it wasn’t in writing, it didn’t happen.” An email will suffice as much as a snail-mailed letter. If the collector refuses to send any offer in writing, refuse to make the deal with the collector. It’s as simple as that. You MUST have it in writing!
6. NEVER give the collector electronic access to your banking account. It might be illegal for collectors to take more than they are allotted from your account but sadly, it happens all the time. If they require payment over the phone either use a separate debit or credit card that has just enough money on it to pay the balance or get a prepaid card at Walmart or Walgreens, put the specified amount on it, and make the payment with that card. Preferably, you should send a cashier’s check to the collector. Usually the collector will tell you that the settlement offer is good for a certain amount of time (like 7-14 days or something like that). This will give you time to go to the bank and get the cashier’s check and then mail it to them. Don’t be cheap here either. Overnight the check to the collector and make someone sign for it once it gets there.
7. In each state, collectors have a certain amount of time to try to get payment on the debt that you owe. This is called the statute of limitations. If your debt is older than the statute of limitations then you do not have to pay that debt. However, it will still be on your credit report for seven years. So don’t use this as an excuse to not pay your debts. Your credit score will suffer for a long time. Each state has a different length of time that collectors can come after you for debt. Here is a list of each state’s statute of limitations. Make sure to check with your particular state’s attorney general’s office to have the most up to date statute of limitations.

(4) What Can Collectors NOT Do?

Although it may seem like collectors can consume your entire mental existence at times, they have limitations as to what they can and cannot do. If a collector is breaking any laws or rules of the Fair Debt Collection Practices Act (FDCPA) then you have the right to complain and maybe even have the entire debt wiped clean (consult an attorney or the CFPB for this).

Here are the things that collectors canNOT do:

1. Call you repeatedly with the intention of annoying or harassing you.
2. Use vulgar or profane language.
3. Threaten harm or violence.
4. Tell others/publish list(s) of people in collections.
5. Calling and not letting them know who you are.
6. Tell you that you owe a different amount than you actually owe.
7. Say that they are an attorney if they are not.
8. Threaten to have you arrested (debtors’ prison is not a thing in the US).
9. Threaten to do something that they really have no intention of doing.

I know that some of those things can seem broad and/or vague. But some of them are not. The best thing that you can do is to keep good notes of:

1. Who you talk to
2. When you talked to them
3. What was said and/or agreed to

If you feel that the FDCPA was violated by a collector and/or collection agency, then you should contact the CFPB or your state’s attorney general. They will be able to sort it out for you.

Final Thoughts

Here is the bottom line: If you find yourself dealing with collectors, don’t panic. It happens to tons of people (myself included). Just follow the steps I outlined above and make sure that the collector and/or collection agency are not stepping outside the bounds of the FDCPA. 

If you do this, you will eventually be just fine. For a little more detailed explanation of how to deal with collectors, check out my other article on old debt.

I’m here to help you. I’m here to give you the knowledge that you need to make sound financial decisions and become more fiscally fit.

If there are any other similar topics that you would like to learn about, please let me know in the comments!

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Until next time!