Dealing with Creditors and Collection Agencies

Always remember the following values when dealing with collection agencies:
  • Always keep your composure
  • Never stoop to their level
  • Tell the truth

Your priorities

Collection agencies will try to make you believe that paying the debt is the only thing that matters. However, you need to remember that you have more important responsibilities than immediately complying with their demands.  Your priorities are the following:
  • food
  • shelter
  • utilities
  • transportation
  • insurance (homeowners, vehicle and health)

Once you have these taken care of, then you should pay off the debt.

5 Steps for Dealing with Collection Agencies

  1. Check your credit report.  Make sure the debt is yours! You’d be surprised at how many weird things show up on a credit report.  You can get 3 free credit reports every year from www.annualcreditreport.com. 
  2. Know your rights.  Get familiar with everything that the Fair Debt Collection Practices Act (FDCPA)that gives rights to consumers and regulates the practices of collection agencies and creditors. From The Wikipedia articles about the FDCPA you’ll find all of the prohibited conduct and conduct required by the collection agents and creditors. Make yourself VERY familiar with what they can and cannot do and know your rights! If they pass any of these boundaries during the phone call, tell them specifically that they are violating the FDCPA and if they continue to do so, you have legal options. Then, end the call. I am serious, DO NOT let these people abuse you. They will try every trick and manipulation in the book to try to get you generate an emotional response.  Once you are emotional you are likely to do something stupid. 
  3. Negotiate.  If the debt is really old and you truly don’t have the money to pay it back, then try to negotiate with the creditor. They will refuse at first, but if you make it known to them that they can either get something rather than nothing, they’ll eventually budge. If you do come to an agreement for a settlement amount, Make sure you get the agreement in writing.  Never, ever take their word for it.
  4. Protect your information.  NEVER give them access to your bank accounts or give them post dated checks. They WILL NOT stick to their promise of taking out the money at intervals. If you owe them $1,000 and give them EFT access, they’ll wipe out the entire $1,000 the first chance that they get.
  5. Make a plan to pay off your debts. Make a plan to save enough up to pay the bad debt all in one lump sum for a reduced amount - usually 50-75% of the total, or pay it off incrementally. Again, make sure that you get it in writing stating, “this amount is a paid settlement IN FULL”. I’ve heard of collection agencies that say you owe X amount of dollars, you pay the bill, and then six months later they say you owe more for late fees and interest.  Make sure you get statements as your debt is being paid.  This will provide the ultimate proof that the balance is zero.

FAQ

Q. What do I do if I am being harassed with phone calls?
A.  Under the FDCPA, you can demand that the phone calls stop and have them correspond with you only in writing.  You will have to send a certified letter so you have proof that they received it.  They will have 72 hours to comply at that point.  If they don't comply, you have significant negotiating leverage.

Q. What should I negotiate?
A.  CFE Recommends the following:
  • a lower interest rate
  • the interest accrued to be waived
  • the late fees, penalties, and/or legal fees to be waived
  • the loan to be extended or restructured, allowing you to skip one or more payments with no penalty
  • a payment plan that would allow you to pay off the amount currently owed, but with no added interest or fees added in the future
  • a settlement that would include a significantly lower balance due (such as 50 to 75 percent of the total)

You may or may not have success with the above, but it doesn't hurt to ask.  If you are rejected on all of the above, ask to speak to a supervisor and make the request again.

Q. Will CFE help me with collection agencies?
A.  Yes.  CFE is very experienced in dealing with collection agencies since we know their bag of tricks.  Contact us today to see how we can help you.