Buzz
There’s no shortage of fraudsters posing as debt collectors, constantly harassing you through calls and texts. If you're blocking these numbers, make sure they're truly scams, and you're not dismissing legitimate debt collectors (who can locate you via social media, by the way).
Legitimate debt collector calls indicate that your original creditor, like a bank or a hospital, has handed your account over to a collection agency in hopes of recouping the debt. However, many agents may be open to accepting a reduced payment or a negotiated repayment plan. Here’s how you can strike a deal when a collection agency reaches out.
Don’t ignore calls from a legitimate debt collector
With the constant barrage of robocalls these days, it's easy to let most unfamiliar numbers sit in your voicemail. But if it's a real debt collector, ignoring the call could be a mistake. Before you take the call or return it, make sure you're aware of your rights under the Fair Debt Collection Practices Act, which is explained below.
Understand your rights under the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) sets limits on what debt collectors can do when pursuing various types of debt, such as auto loans, credit cards, medical bills, mortgages, and more. Some states have additional regulations. Furthermore, legitimate debt collectors are prohibited from making threats or engaging in harassment. Familiarize yourself with your rights in relation to debt collectors so you can avoid falling victim to scams or unintentionally sharing sensitive information over the phone.
Importantly, debt collectors must provide you with key information: the name of the creditor, the amount you owe, the option to request the name and address of the original creditor, and the fact that you can dispute the debt.
Get to know your debt
Use the rights outlined earlier to collect all the details about your debt. You need to know exactly who you're indebted to and how much you supposedly owe. If you decide to challenge a debt, the collector must confirm its validity. As long as you dispute it in writing within 30 days of receiving the validation notice, they cannot contact you again until they provide the written verification of the debt.
Ensure that you request all the necessary information to devise a negotiation strategy. As mentioned earlier, a debt collector might be open to accepting a partial payment proposal rather than going through an extended, stressful collection process.
What not to say to a debt collector
Even if you’re fairly certain that you owe the debt claimed by the collection agency, do not confirm it right away. As noted by U.S. News, verbal confirmation can validate the debt or potentially extend the statute of limitations for collecting it.
If the debt is older (say, over three to six years), hold off on making any payments until you consult with a lawyer. You may be past your state’s statute of limitations for the debt.
Develop your negotiation strategy
Once you've confirmed the debt is valid, it’s time to set up a payment plan that suits your needs. This discussion with a debt collector could be more productive than any early attempts you made with the original creditor. The Consumer Financial Protection Bureau (CFPB) suggests two main approaches for negotiating your debt:
Partial repayment. Even though the debt collector may initially ask for the full amount, they might be open to accepting a lower figure. Share your financial situation honestly and begin negotiations at a lower offer. The CFPB advises starting with a small amount, such as offering 20 to 25 cents for every dollar owed, then progressing to 50 cents, and eventually 75 cents.
A payment plan. Assess your monthly budget and outstanding debts. Skipping other bills to focus solely on this debt could cause more problems down the road. If the original terms were too tough for your financial situation, the collector might agree to a lower monthly payment. Figure out a reasonable amount you can afford to allocate toward a recurring debt payment.
Document everything
When you come to terms on a repayment or settlement agreement, make sure everything is documented in writing. Secure clear proof that the debt will be accepted at a reduced amount and marked as “paid in full” or “paid as agreed.” Without this, the collection agency may go back on their verbal commitments to cease collection efforts or may attempt to renegotiate the debt later. Never make a payment before having written confirmation of the agreement.
Once your debt is paid off, get written proof that the debt has been settled. The last thing you want is for a debt that’s already paid to resurface with another agency attempting to collect.
The key takeaway
It’s crucial to first verify and dispute the debt as needed, exercising your rights to the fullest. You might be surprised by how willing a collection agency can be to reduce your debt to a partial payment or more manageable repayment terms.
Two final tips: Be cautious of third-party services that claim to settle your debts for a fee. This could be another scam. Also, while it may make you wary of debt collectors, this doesn’t mean you should pay the original creditor directly. U.S. News clarifies that once a debt collector contacts you, they’re now responsible for the debt, so it’s best to negotiate directly with them.
If you’re being harassed by a collector, you can file a complaint with the CFPB online or by calling 855-411-2372, and with the Federal Trade Commission online or by calling 877-382-4357. You can also report the issue to your state’s attorney general.
