8 tips to deal with debt collectors like a pro
By Allie Johnson
October 30, 2014
A call from a debt collector can send just about anyone into a panic.
One fact to keep in mind: Some 87 percent of debts that go into collections never get paid, according to a 2013 survey by ACA International, a trade association of debt collectors.
And about 60 percent of consumers never answer their phones when debt collectors call, says Jared Strauss, a former debt collector who now owns a small debt settlement company, Debt Relief a la Carte.
“When you look at it that way, it takes a lot of pressure off,” he says.
That said, it’s generally a bad idea, for the sake of your credit score, to ignore creditors, and keep in mind that if you owe the money, it’s your responsibility to work things out with the debt collector. But, do you know what to do when the debt collector calls?
Here are eight tips that will help you handle a debt collector like a pro:
1. Make sure the caller is legit. When someone calls you claiming to be a debt collector, check it out, Strauss says. Get as much information as possible — including the names of the person calling you, the collection agency, the original creditor and the amount they say you owe. Then call the original creditor to ask if the company that called you is collecting the debt, Strauss says.
“Debts get bought and sold like candy.”
— Ira Rheingold,
of Consumer Advocates
2. Request proof of the debt. “Debts get bought and sold like candy,” says Ira Rheingold, executive director of the National Association of Consumer Advocates, a nonprofit association of consumer attorneys. That means a debt collector might say a consumer owes a certain amount, but not have the evidence to back up that claim, Rheingold says. Ask the collection agency for a written breakdown that shows the original amount plus any other charges, such as fees and interest, he says. However, Strauss recommends against asking a collector to validate a debt you know is valid. It could put you in an adversarial position and make your situation harder to resolve, he says.
3. Know your rights. Third-party debt collectors trying to collect a consumer debt have to follow the rules laid out in the Fair Debt Collection Practices Act, and each state also has collections laws. The FTC recommends that consumers check with their state attorney general’s office to learn more about their state’s debt collection laws. The federal law spells out what debt collectors can and can’t do. For example, they can’t call you early in the morning or late at night, and they can’t cuss you out, Rheingold says. And, he says, “They can’t call your friends and family and say, ‘Hey, Bob over here owes me money.'” If you feel a collector is violating the act, tell him: “I know my rights under the Fair Debt Collection Practices Act, and if you continue [the transgression], I will file a complaint with the Federal Trade Commission.”
4. Face the debt collector. Ignoring calls from a debt collector is one big mistake consumers make, says Alex Szeto, a spokesman for ACA International. Avoiding a collector won’t make the debt disappear and it could make matters worse — for example, leading to a lawsuit, Szeto says. And, if you lose a lawsuit, you could owe even more money. But, watch out: Debt collectors are trained to squeeze information out of consumers and may try to find out if you have assets such as stocks, bonds or cash value life insurance policies, Strauss says. “Giving out this information empowers them and isn’t good for you.” So, be friendly, polite and vague — talking only in terms of what you can or can’t afford, Strauss recommends. And you should keep good records of each interaction with a collector, Rheingold says.
5. Stay calm and collected. It’s easy to get emotional when dealing with debt collectors, but try to keep your cool. Debt collectors will sometimes play on emotions — such as guilt or shame — to try to get you to pay right away. A debt collector might try to befriend you, for example, talking about his dog if he knows you racked up debt for your pet’s vet bill, Rheingold says. Or, he might take an aggressive approach and call you a deadbeat, he says.
“Many collectors are willing to make a deal.”
— Alex Szeto,
for ACA International
6. Look at your financial big picture. Go to AnnualCreditReport.com and pull copies of your credit reports from the three major bureaus, Equifax, Experian and TransUnion, Strauss recommends. If you have multiple debts, make a spreadsheet that shows the amount of each debt, the date of first delinquency on the account and how much time is left on statutes of limitations and the credit reporting clock for that debt, Strauss recommends. For example, a delinquency will fall off your credit report in seven years whether you pay the debt or not, he says. And statutes of limitations, which vary by state, prevent a creditor from suing you to collect a debt after a certain amount of time has passed. Then, look at what you can afford and create a plan for all of your debt, he says. Don’t make a payment just to get the debt collector off your back, Rheingold says, adding that consumers sometimes panic and use their rent money or the grocery money to pay a debt collector.
7. Look at your options. Your choices might include: paying the debt in full in a lump sum, setting up a payment plan with the collection agency or trying to settle the debt (paying less than what you owe). Strauss offers a guide to debt settlement on his website. Depending on the circumstances — for example, if an old debt is nearing the statute of limitations — you might even choose not to pay, experts say. You can try to negotiate, Szeto says: “Many collectors are willing to make a deal.” Try telling the collector: “I hear you. You want to be paid your money. And I want to pay you back. Let’s see what we can work out.” For example, you can ask if the debt collector will reduce the amount owed in exchange for a lump sum payment, Szeto says.
8. Get it in writing. If you do make a deal, experts recommend getting the agreement in writing before you make a payment. Then, after you’ve paid off your debts, be sure to get a zero-balance letter from each collection agency, Strauss recommends. “Hold onto it for about 10 years just to be super safe,” he says.