The Basics of Debt Collection
Debt Collection has become a $15 Billion dollar a year industry and is continuing to grow quickly. Many companies buy zombie debts for pennies on the dollar in an attempt to recover what is owed. As you can imagine, many of these debts are credit card debts but they also stem from cell phone companies, lenders, gyms, cable companies, medical offices and even public libraries among many others. The debt collectors proceed by calling the consumer who owes the debts and then negotiate to have it paid back. It is their job to get you to pay up and sometimes they push the limits of the law with the number of phone calls/letters and the tactics used to scare you in to paying a debt. If you feel that you are being harassed you should contact an attorney to help gain control of the situation.
What happens first?
If you have an overdue debt that has been sent to a collections agency, they will contact you and then send a letter explaining the situation. Open this letter immediately, you only have 30 days to dispute certain facts it contains. If there errors or the debt is not yours, you should notify the collector immediately in order to resolve the matter. You should keep notes of all of your communications in a communications log as well as keep copies of any letters sent to you.
The Impact on Your Credit
When your debt is sent to collections you will also see a new record appear on your credit report. This collection record will remain on your credit report for 7 years from the last 180-day late payment on the original account, whether or not you pay the debt back. In the event that your original account is also on your credit report, both account records will remain on your report for 7 years. This is also true if a new record appears when your debt is sold to a new collection agency. Review the information a collection agency posts on your credit report very carefully. It is fairly common for collectors to report incorrect facts to help with negotiations.
Understand your rights under the Fair Debt Collection Practices Act (FDCPA)
The federal Fair Debt Collection Practices Act protects consumers from threatening and harassing debt collection tactics. You can request that a debt collector no longer contacts you or only contacts you via mail or through your attorney if you have one. The FDCPA also keeps debt collectors from using obscenities with you, telling you owe more than you do, tell you that you’re guilty of a crime, etc. It is very important that if you feel you are being unfairly harassed by a debt collector and that they’re violating the FDCPA that you contact a lawyer immediately. Many will review your case for free.
What you should do
Once you have verified that they debt is yours and is accurate and have read your rights under the FDCPA, you need to consider your options. In most cases you should negotiate a deal to pay the collector and work on repairing your credit.
Negotiating to pay
When you decide to pay the collection debt, you should contact the collector to negotiate an agreement. Since they bought the debt for pennies on the dollar you can often negotiate for a reduced settlement payment that is mutually beneficial to both parties. Make sure you receive the terms of your settlement in writing.
