Debt collectors make phone calls every day to collect money that may or may not be owed. It is not uncommon for a person to have one of these collectors contact them at least once in a lifetime. According to urban.org, 71 million U.S. adults have debt in collections. Having debt in collections does not make a person bad. It is just something that can either happen by chance or by error.
Debt collectors do not always play fairly even though there are laws in place to hopefully prevent dishonest tactics. With collectors sometimes using less than legal or ethical strategies for collecting debts, it is important to know the rules. Education is the key to understanding what a debt collector can and can’t do.
What Should You Immediately Do If You Receive a Call from a Debt Collector?
- The first thing to do is not believe a word a debt collector says. They might be telling the truth, but chances are whatever they say it is not 100% accurate.
- If you do get a phone call, never deal with a debt collector on the telephone. Ask them to mail the information to you. It is always best to get it in writing and they are required to do this by law when asked.
- Remain calm, but firm with the debt collector. Do not allow yourself to be bullied.
- Do not pay anything over the telephone. This is a common practice for them to ask for a payment.
- Do not voluntarily provide information. Offer the least amount possible.
- Do not ignore phone calls. Also, if you receive a letter in the mail, do not just put it to the side and think it will go away. It won’t. Debt collectors are relentless.
The number one rule to not forget with debt collector phone calls is Do Not Deal with Them Over the Phone.
Fair Debt Collection Practices Act
There are certain guidelines debt collectors must follow when trying to collect. Not following the rules is a violation under the Fair Debt Collection Practices Act. Collectors can be held responsible for not following these regulations. Below is a brief summary of the guidelines debt collectors must follow and your rights when they are trying to collect a debt.
What are Debt Collectors Allowed to Do to Collect a Debt?
- Debt collectors can call you, but only during reasonable hours. They can also call friends or family, but this is only to locate you. If they need your address or phone number they might reach out to family or friends. They cannot discuss your debt with anyone else in most cases except your spouse or an attorney.
- A debt may be sold several different times. Debt collectors will often sell their debts several times over a number of years to different companies.
- Debt collectors can send correspondence in the mail.
- They are allowed to try and collect debt a person owes.
What are Debt Collectors NOT Allowed to Do?
- Collectors are not allowed to contact you during unreasonable hours. Under Federal Law, reasonable times are between the hours of 8am and 9pm.
- They are not allowed to lie to collect money they believe you owe. Threatening wage garnishment or legal action if it is not true is not legal for them to do.
- If a debt collector calls you at work and you request this to no longer be done, they must not do it. The request can also be sent in writing.
- They are not allowed to collect more money than you owe.
What are your Rights with Debt Collectors?
- You have the right to request written documentation of the debt they believe you owe. A written validation letter is a requirement. It needs to be sent within 5 days of a call. The letter should state the amount owed and have the collectors name on it.
- If you believe you do not owe the debt a collector is claiming, you can send a letter within 30 days explaining the debt is not owed. A debt collector must then stop contacting you unless they send written verification of the debt.
- You do not have to take abuse. If you receive a call from an abusive debt collector, request the information in writing. Once this is done, hang up.
What Should Be Done If You Believe a Debt Collector Violated a Law?
Although many debt collectors have gotten somewhat better with their methods to collect, laws are still broken. If you believe a debt collector has not followed a regulation, report them to the Consumer Financial Protection Bureau and Federal Trade Commission. These organizations are in place to prevent unethical debt collection practices.
Tips and Guidelines for Dealing with Debt Collectors
Knowing the laws debt collectors must follow is the first step in acquiring the education to deal with them. The next step is learning some of the recommended tips and guidelines for working with a collector.
- Never provide your banking information to a debt collector.
- Before ever paying anything, make sure to get the deal in writing.
- If a deal is made to get the debt removed from your credit, it is specifically important to get this part in writing.
- Do not pay anything over the phone. Debt collectors will often ask for payment on the telephone saying they will settle for much less if it is done at that time. Do not do this. They will settle for less in almost all cases regardless of an immediate payment
- Send any correspondence in the mail certified. Things get lost in the mail and it is important to show proof that anything sent is received.
- If a determination is made that a debt is legitimate, always negotiate. Debt collectors are sold the original debt and they are looking to collect something which is better than nothing. Start with 10% of the original amount. They might not accept this, but it can always go up from there.
Debt Collections Statue of Limitations
One important factor to keep in mind with debt collections is the statute of limitations. This is the time period a collector can sue for the debt. This time can vary by state and it is important to know what this period is in your situation.
When the statute of limitations passes the debt may still be owed. However, there is no requirement to make a payment at this point. The debt will still be listed on a credit report if it is still in the limit for reporting. Collection delinquencies can remain on a credit report for 7 years from when it was first reported.
When it comes to dealing with debt collectors, the statute of limitations is something important to keep in mind. This is particularly the case with debt that may have not been truly owed and was not able to be removed from credit reporting. This can and does happen.
At the point when the statute of limitation is reached do not settle the debt if it was not owed just to get it removed from a credit report. Settling even small debts that may not be genuine to improve a credit score is not a good idea. When they get to a certain age, they will fall off credit reporting.
If a debt collector is still contacting you regarding a debt that is past the statute of limitations, write them a letter stating this and that you no longer want them to contact you. Let them know the debt will not be settled, it is past the limitation, and there is no longer any legal action they could possibly take.
Never make a payment on a debt past the statute of limitations. It is unlikely it will be removed from a credit report. Making a payment of any kind could start the clock again on the statute of limitations. It is a common practice for debt collectors to try and get some type of payment on old debts they know no longer fall within the statute of limitations period. Collectors will even try to tell a person that it will improve their credit by making payment. It will not in most cases.
Having Debt in Collections Does Not Make a Person Bad or Irresponsible
There are all kinds of debts that can end up in collections. Credit cards, medical bills, and delinquent auto loans are just a few examples. Being irresponsible with credit cards or taking out large auto loans that can’t be repaid is irresponsible. However, there are reasons debts may go to a collector that are not controllable.
Unpaid medical bills are a big part of the debt collection business. A survey done by Common Wealth Fund found that 41 percent of American working adults have issues paying off medical bills. If a person is not insured or has a poor health insurance plan, chances are a medical bill may end up in collections depending on the cost of care or procedure. Having medical insurance is something everyone should obtain. Yet even with insurance, there are situations that could result in medical bills that are not able to be paid.
Insurance itself is intended to transfer the risk of a catastrophic financial event. However, a plan with a $6000 deductible, for example, is still a catastrophe for many people even with health insurance. Depending on a health insurance plan and its deductible, medical bill collections are still a possibility. The rising costs of medical care and health insurance have increasingly made the possibility of being called by a debt collector a reality for many Americans.
Credit Report Errors and Thieves
There are valid reasons debt collectors may reach out to try and collect money owed. But many times there could be errors. The Consumer Financial Protection Bureau lists a number of issues that could be on a credit report related to an error. Debt collectors might be trying to collect on these errors. Some examples listed are incorrectly reported delinquent accounts, closed accounts, or even the same debts listed more than once.
Medical debt errors are another reason debt collector may try to collect on something. According to 1MD, a staggering 80% of the medical bills sent could have errors on them. If a medical bill has an error that can’t be resolved and a person refuses to pay, it will go to collections. It can take some time to resolve billing errors and they happen all the time.
Errors on medical bills are often related to coding errors. This occurred for me personally in the past where the medical coder did not code the insurance correctly. The result was the total bill of a hospital stay was due. The hospital claimed $32,000 was owed. Luckily it was an error they were able to determine eventually. The hospital just said, “Sorry, it was a coding error.”
Thieves in the form of scam artists and people that are less than truthful will also report things to collection to try and make some extra money. I once rented an apartment and had this occur. When I moved out the apartment was thoroughly cleaned and left in better condition then when I moved in. The rental office told me to put the keys in the drop box at the rental office. I followed their directions. A few months later I got a bill saying I owed $1200 for leaving the apartment uncleaned and not turning the keys back in. I refused to pay and fought the issue for some time. It eventually went to collections and I just had to wait for years in order for it to fall off. Sometimes things just end up in collections that you may not be able to avoid.
There are circumstances where abusive debt collectors should be good at what they do. An example of this would be with a person that knows they owe a debt and they have the means to pay it. There are stories all the time of doctors that refuse to pay their student loans while living in luxury and driving around in their Mercedes. Although things like this can happen, a big part of the time a debt goes to collections because the person that owes the money just does not have the funds to pay it. Debt collectors do not distinguish between good people that owe on debt and the dead beats that just do not want to pay. They don’t care.
Although the Fair Debt Collection Practices Act is in place to protect people from unfair debt collection practices, dishonest and unethical collectors do still exist. Even with collectors that may follow the law, they may still try to use collection tactics that are on the borderline of being honest. Being educated on what is legal with debt collection practices is the key to working through the process.
With the likelihood of a medical billing error, crediting reporting inaccuracies and scam artists reporting items to collections, there is a real likelihood most everyone will have to deal with a debt collector at some point. Also, with the rising costs of insurance and healthcare, the possibility of not being able to fully pay for a medical issue is a reality for many people. This could also result in being on a debt collectors list.
If you do have a situation that ends up with a debt collector where you legitimately owe the money, always remember to negotiate. A majority of the time they will settle for much less. Always get everything in writing and do not work with them over the telephone.
When it comes to debts that are not owed, they can be a little more difficult to challenge. Do everything you can through mail correspondence and keep the statute of limitations in mind. If it is something that just can’t be resolved, unfortunately, it will just remain on your credit report until it falls off. Paying a very old debt that was not truly owed just to improve your credit is not something that will likely work.
If you ever find yourself on the receiving end of a debt collector, the most important thing to remember is to always get everything in writing.