March 18, 2014

How to Deal with Debt Collectors

Read more about Get Me Out of Debt

Even when you're down and out and drowning in debt, you still have rights. Creditors can't treat you as they please, like some pitiful pariah.

You may feel your most vulnerable, but you need to stick up for yourself. Here's how to take control when debt collectors come calling.

Be sure you owe what they say you do.

There's no shortage of scammers looking to make a bad situation worse. According to the Consumer Federation of America, the Federal Trade Commission brought four lawsuits in 2012 against fraudulent collectors who collected millions of dollars in “phantom” debt that did not exist or was not owed to them. Consumers had been intimidated into paying over $15 million when they were threatened with arrest and exposure of their debt situation to their employers.

Crazy threats are just one of the telltale signs of a wayward collector. The FTC offers other red flags of fake debt collectors, such as callers who:

  • seek payment on a debt for a loan you do not recognize;
  • refuse to give you a mailing address or phone number;
  • ask you for personal financial information;
  • try to scare you into paying, even going so far as to threaten to have you arrested or to report you to a law enforcement agency.

Call their bluff. Tell them you refuse to talk any further until you get a written “validation notice,” which must include the amount of the debt, the name of the creditor you owe, and your rights under the federal Fair Debt Collections Practices Act. If they balk at this request, the conversation should come to a close. By no means should you give these callers any personal information like your Social Security number or bank account information. And know that if you send money to non-legit collectors, you may not only be out of the payment – you may also be inviting them to continue harassing you if they view you as easy prey.

Get more information if needed.

If, on the other hand, you think you the person on the other line may be right that you owe money, but you aren't sure how much or you need more information, you can dispute the debt or request verification in writing (the validation notice). This step will provide you with the exact amount you owe, the name and address of the original creditor, or other information that may help you figure out where you stand, according to the Consumer Federation of America.

And this step will get give you more time. According to the Fair Debt Collection Practices Act, collectors have to stop collections until they respond to your written request for more information. Be a stickler about keeping excellent notes on everybody you talk to, including their name, title, date, and points discussed. Record what type of correspondence you make, including how you send any letters. You may even want to get return receipts on your mail.

Set the ground rules.

If there's no doubt the debt in question is yours, then know that there are lines that shouldn't be crossed by collectors. For one thing, they have to show you some respect. They can't call you at all hours, specifically not before 8 a.m. in the morning or after 9 p.m., unless you give them permission to do so. They also shouldn't call you on the job if you've explicitly told them, over the phone or in writing, that you don't want them calling you at work.

When you have told them all you can about how you plan to resolve the issue, you can ask them to stop contacting you. Write a letter (again, keep a copy of the letter and request a return receipt). When they get your letter, they can't keep pestering you, except to tell you there will be no further contact or to let you know that they or the creditor intend to take a specific action, like filing a lawsuit.

Don't, however, think that sending a letter asking them not to contact you means that you're off the hook for the money you owe. Hardly. You have to pay what you owe, but you can at least stop them from making your blood pressure rise every time the phone rings.

Know your rights.

Debt collectors have to play by the rules. They cannot use threats of violence or harm, out you publicly like blasting you on social media as someone who's not paying their bills, cuss you out, or call incessantly. They also can't tell lies when calling, such as pretending they are from the government, saying that you have committed a crime, claiming that you'll be arrested, or misrepresenting how much you owe. Such misstatements aim to scare you.

The fact is, even though you are overdue on your debt, you have rights. Check with your state attorney general's office for relevant laws in your area. If you think the debt collectors have gone beyond what the law allows, speak up. Along with your state attorney general, there’s the FTC as well as the Consumer Financial Protection Bureau. Exuberant and fraudulent debt collectors are under scrutiny from regulators and consumer groups, so your story likely won't fall on deaf ears.

Much as you have rights, debt collectors also have rights. If you don't pay what is legitimately owed, you can be sued. You'll want to respond or get a lawyer to do it for you. If the collectors win the case, you could your wages may be garnished.

The bottom line – debt collectors know you're in a tough situation. While you work to pay off your debts, you don’t need to give up your dignity or self-respect and make the situation any tougher.

More from CreditDonkey:

Dig Yourself Out of Debt

How to Get Out of Debt

10 Smart Ways to Get Out of Debt

10 Smart Ways to Save $1,000 a Month

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