How Should I Deal With Collection Agencies?

You are unable to pay your debt to a creditor and haven’t made a payment for months, or longer. If you had the money, you probably would have paid the bill.  Or, you have the money and you’re choosing to not pay the bill.  Either way, the creditor has either sold your debt to a collection agency or hired a collection agency to collect it.  What do you do now?

Don’t ignore the initial phone call or letter. Despite what some people will tell you, don’t ignore the collector, because they will continue to contact you and could start legal action.  It is best to talk to them to understand the purpose of the call, the name of the creditor and the amount of the bill.  If they don’t have this information, they have five days to send a written notice to you.  In addition, the agency reports this debt as a collection to the credit reporting agencies, which negatively impacts your credit.  Ignoring them does you no good.

Dispute and validation – You have 30 days to dispute the bill and request a debt validation.  If you don’t, the collector considers the bill valid.  The collector has another 30 days to respond with documentation that you owe the bill and they are authorized to collect for the creditor.  If you still don’t agree with the amount of bill or that you owe it, you have 30 days to send a dispute letter.  When the agency receives this letter, they cannot contact you until their investigation is completed.

Deal with them in writing – Make sure you document the calls you receive from them and do most of your contact through letters for documentation.  By law you can stop collectors from contacting you, but you must send a letter requesting them not to do so.  The agency cannot contact you again, except to inform you by phone or letter that they will not contact you again or to inform you of the legal action they intend to take.  This stops the contact but not the obligation to pay the debt.

Victim of abuse – If you have been harassed and/or threatened by a collector or any other violations of the FDCPA, you should register a complaint with  the FTC, your state Attorney General or Consumer protection Office or the American Collectors Association. You can sue the collection agency and if you are successful you may receive the amount of the damages and up to $1,000; the collector may be liable for attorney fees and court costs.

Hopefully, you will never get to this point.  I don’t want anyone to have to deal with an unpleasant situation and collectors can be unpleasant.  If you do, make sure you verify the bills and communicate in writing.  The best solution is to try to work with the creditor before the account is sold or transferred to a collection agency.  If not, try to work with the agency to work out a solution.  Settlement is a valid strategy.  Offer them 20% of what they say you owe and negotiate from there.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Money & Identity

This post was written by John Ulzheimer