Debt collection is the process of pursuing payments of debts owed by individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector.
Often when a bill is unpaid after its stipulated tenor, the creditor might have to involve/contract external loan collectors to retrieve the loan. There are several ways to go about resolving collection debt, and similar to debt settlement, you may not need to pay the full balance.
Debt collectors often work for debt-collection agencies, though some operate independently. Some are also attorneys. Sometimes these agencies act as middlemen, collecting customers’ delinquent debts- (debts that are at least 60 days past due) – and remitting them to the original creditor.
The process of debt collection can be overwhelming for the borrower, however, there is nothing to be frustrated about.
It’s important to know your rights when it comes to debt collection. Let us find out exactly what a debt collector can and cannot do according to the law, how to negotiate with debt collectors, so that you can make an effective plan to handle your debt collectors.
How debt collectors get your information
When a debt becomes delinquent and your creditor contacts a debt collector, and passes the responsibility of collecting the debt 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, they may also try an internet search to find your current contact information.
If a debt collector got your information from the original creditor, they will have your personal details, such as where you live, the amount owed and the company you originally owed money to. If you are dealing with legitimate debt collectors, they should have no problem sharing information related to your debt.
Ways to deal with debt collectors.
Respond to them: Debt collectors will continue to contact you until your debt is paid. Ignoring a debt collector when a debt is yours can cause further damage to your credit score and report.
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. Ask who the original creditor was, the original debt amount and how much is owed. The more details the debt collector can provide, the better. 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.
Document the Process: Legitimate debt collectors are required to send you a letter in the mail detailing your outstanding debt, such as who the original creditor is and how much you owe. You should also get information about how to dispute the debt, which can come in handy if the debt in question isn’t yours.
If you want a verification letter from the debtor, send a written request, so that it is documented. When you receive a letter back from the creditor with information about the debt, verify that it is your debt. If you don’t think the debt is yours, you can send a dispute letter, but you must send it within 30 days.
Avoid giving out personal details over the phone: Regardless of if you can pay the debt or not, avoid excessive talking. Don’t share anything over the phone, including if you can pay and how you plan to. Instead, request a letter with the original debt information.
Try settling or negotiating: After you have received your letter and can verify that the debt is yours, see if the debt collector will settle for a portion of the cost if you pay upfront. If they still want the full amount due, ask if you can set up a payment plan.
Understand your rights when dealing with debt collectors
All debt collectors must follow these rules:
Rules for contacting you: Debt collectors are only allowed to call you between 8 a.m. and 9 p.m., and they are not allowed to call you at work. If you get a call outside of these hours, you might be dealing with a debt collection scam. If a debt collection agency is legitimate, it should have no problem providing you with company information, including a callback number, company name and address.
Debt Collectors are not allowed to harass you: Debt collectors cannot make you pay more than you owe or threaten you with arrest, jail time, property liens or wage garnishment if you do not pay. Wage garnishment might be legal under your nation’s law but your debt collector will need to take you to court first. If a debt collector is posing as police and threatens to arrest you, there’s a chance that it’s a scam; in this case, you can report the threat to the Federal Trade Commission and the Consumer Financial Protection Bureau.
Debt collectors must provide you with information about your debt, not you: They have to tell you a few key facts about your debt, also called “validation information.” This includes things like how much you owe, who the original debt was owed to and what you can do if you don’t think this is your debt.
What extent are debt collectors permitted to go by Law.
A debt collector can:
- Visit you at home
- Speak to you discreetly about your debt and try to set up a payment arrangement
- Ask you to make payment to them
Debt collectors cannot do any of the following:
- Pretend they are a bailiff or enforcement agent – this is a criminal offence (impersonation)
- Force their way into your house or refuse to leave when you tell them to
- Speak to neighbors, family or flat-mates about your debt
- Take any of your belongings or clamp your car
- Visit you at your workplace
- Act in a threatening or intimidating way, or cause a disturbance
Can a debt collector visit my home?
Your creditors my use various option to try to recover your debts. One way is to send a debt collector to visit your home in person, although they will often call or write to you first. You are not obliged let a debt collector into your home and they don’t have the right to take goods away. They are also known as doorstep collectors or field agents.
It is, however very important to understand that a debt collector is not the same as an enforcement agent or bailiff. Debt collectors have no special legal powers. You may feel under pressure to pay more than you can afford, but do not feel threatened.
Debt collectors may work for your creditor, or they may work for a separate debt collection agency.
It’s their job to recover the money owed to the company they work for or represent. In many cases, they will agree to the debts being paid back in stages, if that means they’re more likely to recover some or all of the debt. We can help you work out how much you can afford to pay towards your debts.
How to spot a debt collection scam:
To ensure that a debt collector is legit, keep an eye out for the following signs:
Watch your mailbox for Validation: A validation letter is one way to make sure that you’re dealing with a legitimate debt collector. If you have just gotten a phone call from an alleged debt collector, request a validation letter before making any attempt to pay off the debt in question.
Contact your Creditor: Contact your creditor and confirm if they the person or organization approaching you were contracted by them
Verify your details: Even if the company is legit and the debt is legit, there’s a chance that it might not be yours. Request personal details about the debt, including the original creditor and the amount. While the debt might be real, it could be for someone else who shares your name, or it might be from an act of identity theft.
Control your payment options: If the person on the phone claims that you can only pay through a wire transfer or a prepaid debit card, you might be dealing with a scammer. Even though debt collection isn’t the most ideal situation, most companies will work with you to get a debt paid through terms you’re comfortable with. You should also try negotiating — many debt collectors are willing to create a plan that helps you pay.
Summary of Money’s guide for negotiating with debt collectors.
- Understand how debt collection agencies work
- Negotiate with the collection agency using your proposal
- Make sure all agreements are set in writing
- Keep calm, be patient and be careful about what you say
- Fully comprehend the extent of the debt (and learn how to read your credit report)
- Know your rights under the Fair Debt Credit Collections Practices Act
- Ask the debt collection agency to validate your debt
- Come up with a reasonable repayment or settlement proposal
Summary
If you get a call or notification from a debt collector, follow the steps you have learnt to help you deal with it. There are rules that debt collectors must follow to collect on old debt, so it is crucial to know your rights in this situation.