It happens to many people; a cell phone or cable bill goes unpaid long after changing carriers, an old medical bill that you thought was paid by your insurance but was actually denied and you didn’t realize it, a credit card balance from long ago that you couldn’t afford to pay and now the account is in collections.
This is not the most pleasant or fun subject to blog about, but hopefully it will shed light on the subject of collections and your rights as a consumer. This blog will also identify resources to help you deal with debt in collections.
Who collects debts?
First, companies normally do not want to send the account into collections. This can have a negative impact on their relationship with the customer, and it’s expensive. Generally, an account goes into collections after the creditor has done everything in its power to collect from the customer. This usually occurs after three billing cycles. After their collection attempts have failed, one of the following three types of representatives authorized to collect debt will assume the responsibility:
Credit Grantor: Known as the company that originally granted the credit. Most large companies have their own collection departments. If a customer is late in payments within the first few billing cycles, this department will try to work with the customer to “rescue” the account from being sent to collections.
Collection Agency: The original creditor may contract with an outside agency to collect the unpaid debt or they may actually sell the debt to the collection agency at a discount. These are the people who make the “sometimes” harassing phone calls and send the frequent letters.
Attorneys: Collections are referred to attorneys after the collection agency has been unsuccessful in collecting the debt. A referral to an attorney is usually done if the amount of debt is large since attorney fees can be very expensive. Attorneys have special means of investigating and tracking debtors and can take legal action by filing a lawsuit.
Eight Ways to Communicate with Collectors
- Know your rights. The Fair Credit Billing Act (FCBA) offers consumers protection against harassment or unfair treatment by debt collectors. This includes the handling of billing errors and disputing debt. Communicating in writing with creditors and following the specified time frames can provide consumers the most protection under the law.
Below are some things that collections agencies are not allowed to do under the FCBA:
- Give false or misleading information about your debt to others
- Call after 9:00 PM or before 8:00 AM within your time zone
- Interrupt the work routine at your employment
- Make excessive calls to your work or home
- Send a letter that appears to be an official government document
- Misrepresent themselves as a government agency or law practice
- Physically threaten you or a family member
- Imply that there may be physical damage done to your property
- Deposit a post-dated check prior to the date on the check
- Continue to harass a consumer after being notified in writing to cease
- Prevent the collection in the first place. Don’t ignore the unpaid bill; open the envelope. Contact the creditor and explain the situation politely and truthfully. Never agree to a payment arrangement that is not realistic for you. Once a creditor knows you are sincere in wanting to pay, they most likely won’t turn it over to a collection agency.
- Request a termination of contact. If the account is with a collection agency; a simple letter requesting that all contact cease will eliminate harassing phone calls and letters. The collector may then send a final notice stating any further action to be taken. Always maintain a copy for your records. If the collection agency continues to contact you, they could be in violation of the FCBA.
- Dispute all billing errors. This should be done in writing within 60 days of receipt of the bill. Keep a copy for your records. The creditor has 30 days to respond; and the dispute must be resolved by the creditor within two billing cycles or no more that 90 days.
- Dispute the debt. Within 5 days of initial contact, a collection agency must send a written statement informing the consumer of the nature of the debt and the right to dispute it. It is important to read this statement carefully. If the consumer feels that the debt is not justified, they must respond immediately by certified or registered mail.
- Correspond in writing and keep records. Create a paper trail! Keep copies of every letter to and from the collections agency and/or with the company the debt originated.
- Do not let the collection agency scare you. Don’t be intimidated and don’t let their tactics hurt your judgment when it comes to making decisions.
- Check out the Consumer Financial Protection Bureau website. This is an excellent resource for consumers when it comes to learning more about your rights including sample letters for contacting your creditors. They also encourage you to contact them with complaints related to debt collection through their website or by phone. www.consumerfinance.gov