How to Resolve a Complaint with a Debt Collector
A call from a debt collector can be one of the most distressing calls you’ll ever
take. It can happen to almost anyone. When a job disappears, or unavoidable expenses
sink the family budget, it’s easy to fall behind with your payments and end up in
collections. What do you do?
This How-to offers tips for navigating the rough and unfamiliar terrain of the collection
process, and shows where PeopleClaim's online dispute resolution system can help
you fight back, assert your rights, expose collection abuses, and turn one-sided
demands under pressure into a negotiation that may substantially reduce what you
have to pay to settle the debt.
First: Understand what’s happening
If you’re called by a third-party collection agency, your original creditor may
be entirely out of the picture—they’ve sold your delinquent receivable to the collection
company. Or they still have you on their books but have farmed out your debt to
the agency, “consignment-style.” In either case the agency’s profit depends on getting
from you what the original creditor could not. They’re highly motivated. And you’re
automatically at a disadvantage.
Suddenly you’re talking with a “collections professional”—someone who’s been trained
to understand debtor vulnerabilities and who knows which buttons to push to get
the money. He or she is on commission; for extra incentive there’s a carrot dangling
in the form of a five-figure monthly bonus for top performers. These folks are going
to be a lot tougher than the bank, or the store, or the hospital was—and a lot more
persistent. In fact, you’re going to be squeezed every way that’s legal, and possibly
some that aren’t. (A look at the provisions of the federal law on debt collection,
described below, gives an idea what you can encounter.)
Next step: Know your rights.
The federal Fair Debt Collection Practices Act (FDCPA) gives you legal rights
vis-a-vis unreasonable, deceptive, and abusive collection practices. It’s jointly
enforced by the Federal Trade Commission (FTC) and the Consumer Financial Protection
Bureau (CFPB).
- Law applies to: third-party
collection agencies (not original creditors); other companies that purchase discounted
consumer debt for further collection/recovery efforts; certain lawyers whose practice
includes ongoing debt collection activities.
- Law covers: personal debt,
including credit cards, auto loans, mortgages, medical bills, student loans, and
others. It does not apply to business debt.
Specifically, the FDCPA prohibits the following:
- Phone calls before 8 AM or after 9 PM (unless you agree to receive them);
phone calls to your place of work—provided you tell the collector you’re not allowed
to take the call at work.
- Contacting you against your wishes. If you’ve told them in writing not to
contact you, the collector, after receipt of your demand, is prohibited from further
contact—except a) to confirm there will be no further contact, or b)
to advise you of a specific action against you such as a lawsuit. Important:
Keep a copy of your letter requesting no contact, and always get delivery confirmation
(Certified or return receipt) when sending a no-contact letter.
- Continuing contact after you’ve told them the debt has been paid, or have
asked for verification of the amount they say you owe. You must tell them in writing
that the debt has been paid (or that you dispute the amount) within 30 days after
you receive the collector’s validation notice, which is a written statement of how
much you owe. (Again, keep a copy of your letter and get delivery confirmation.)
- Contacting you personally if an attorney represents you.Once a debt collector
has been told that you are represented by a lawyer, further attempts to reach you
must stop—unless your lawyer does not respond to their communications.
- Contacting third parties for any purpose other than obtaining your location.
- Failing to protect your privacy if contacting third parties to obtain your
location. This extends to such things as letterhead sent to a third party that would
identify the sender as a debt collector, sending postcards rather than sealed correspondence,
or volunteering the name of the debt collection company if speaking with a third
party.
- False representations. To you: Using a fake company name; posing as
a law firm, a government agency, or a credit reporting agency (including using printed
materials that resemble official documents); alleging printed materials they send
you are legal documents if they are not (and vice versa); alleging that you have
committed a crime; misrepresenting the amount you owe. To others: making false representations
of any kind in attempting to gain information about you or collect a debt; giving
false credit info to third parties, including credit reporting agencies
- Threats. Threats of violence or harm; threats of arrest; threats to garnish
wages or seize property (unless state law allows this); threats of legal action
if state law prohibits it or if they don’t mean to pursue it.
- Use of profanity. Obscene or other abusive language (including racial slurs)
in attempting to collect a debt are violations of the law.
- Unfair practices. Depositing your post-dated check ahead of schedule; adding
other fees and charges to the amount due—unless allowed in your contract to the
creditor or by law in your state.
That’s a very brief summary of what’s covered by the FDCPA. You’ll gain valuable
knowledge and peace of mind by reading the
full provisions of the Fair Debt Collection Practices Act.
Supplementing this, the Consumer Financial Protection Bureau (CFPB) is taking steps
under the Dodd-Frank Act of 2010 to extend protection to include collection activities
of originating creditors, not just third-party collectors. Like the FDCPA they’re
taking aim at unfair, deceptive, or abusive acts or practices, which they call “UDAAPs.”
Learn more
here.
In addition, your state may have debt collection laws that augment the provisions
of the FDCPA. State law, for example, may already extend your rights to cover collections
by original creditors. State laws do not negate or reduce rights guaranteed under
the Fair Debt Collection Practices Act. Contact
your state attorney general’s office for specifics.
Note: Even though certain debt collection practices are illegal, don’t assume
you won’t run into them. The players in this business are naturally aggressive and
step over the line frequently. So if you’re involved in the collections process
it’s important to know when the collector has broken the law. If you know, it gives
you leverage; if you don’t, you’ll be under additional stress and at a disadvantage.
Your grounds for dispute:
There are two basic areas of dispute with a debt collector:
- Is the amount in question accurate? If you can prove that it isn’t
(or that you don’t owe it) the collector will need to revise his demand or go away.
But—whatever amount you do owe, you will need to pay, or reach a negotiated settlement.
Or run the risk of getting sued.
- Do the collector’s methods violate the law? If they overstep the FDCPA
or state law the debt collector can be sued—by the FTC and/or your state attorney
general and/or you. But again, transgressions by the debt collector do not erase
the debt.
So stay focused on these two topics. Everything else is beside the point. Contrary
to what many debtors hope, personal economic hardship becomes a non-issue when you’re
placed in collections. It won’t get you off the hook and it won’t buy an ounce of
sympathy. The collectors have heard it all. They’ve even got a code name for it:
“HLS,” hard luck story. They don’t care.
PeopleClaim can help
In either case, filing a claim against a debt collector through PeopleClaim can
be a powerful tool. Below we show you how to use the system when you’re in collections,
but first read the following 11 tips for dealing with debt collectors. They’ll
help you prepare a claim that will hit the right points, avoid pitfalls, and send
the collection agency strong signals to handle your case with care.
11 Tips for dealing with Debt Collectors
- Don’t Panic. Debt collectors play on your emotions, primarily fear. They’re
counting on catching you off guard, and they want you in a state of panic so you’ll
find a way to cough up the money to get relief. Stay calm; you have better options
than they’ll present to you. Don’t engage with them in Q & A. They’ve practiced
conversation scenarios designed to get commitment from you. Debt experts recommend
saying very little. (Actually, apart from your mailing address you don’t need to
tell them anything.) The only essential is to request validation of the debt, per
Tip 2 below, and to get their name and contact information. Be polite but firm.
End the conversation as quickly as possible; if necessary, by hanging up.
- Request validation. The phone rings. A stranger gives you his name and says
you owe money and have to pay—now. You don’t know who he is, you’ve never heard
of his company. Requesting validation of the debt is your crucial first step. (Make
sure you follow up in writing.) The collection agency must comply, confirming in
writing the amount owed and verifying their authority to collect. Collection attempts
must cease until you receive this validation. When the document arrives examine
it carefully. Maybe you don’t owe the amount in question. Or maybe it’s an old debt
that’s “time-barred,” which means the collector is over a barrel in terms of legal
recourse. Many collection companies make a profit buying and collecting stale or
other “junk debt”—in part because debtors fail to demand validation before agreeing
to terms.
- Never take a collector’s advice on “where to get the money.” Debt collectors’
suggestions are not in your best interest. According to one undercover journalist
working for a large collection agency, “We suggest that they take money out of their
IRA, drain their home equity with a second mortgage, load up a different credit
card or even skip a mortgage payment.” Enough said.
- Take Notes. Write down the date and time of the call, the name of the caller
and his agency, the alleged amount of the debt, and anything said that may violate
the FDCPA. Save voicemail messages. Some debt specialists advise recording phone
conversations. “Just a moment while I turn on my recorder” can help encourage FDCPA-acceptable
behavior, and an audio recording will give you more information than written notes.
Before going this route find out if state law requires you to tell the other party
up front that you will be recording the conversation. Check state recording requirements
here.
- Communicate by mail. And always get proof of delivery. Don’t rely on the
phone or email for your communications with a collection agency. Anything important
you’ve said over the phone or in an email message, also put in hardcopy and send
by mail. Send a letter for any of the prescribed FDCPA steps: to request validation
of the debt; to inform the collection agency the debt was paid; to tell them you’re
not allowed to take calls at work; to request no further contact; or for anything
else you want on record.
- Negotiate.. A strongly-worded demand for payment in full is a debt collector’s
way of putting his best foot forward. But chances are he’ll settle for less. You’re
dealing with a company that bought your receivable for cents on the dollar. (Or,
if they don’t own your debt, their contract with your original creditor gives them
plenty of room to maneuver.) Debt specialists, including former collectors, say
you may be able to cut the bill by 50% or more, if you start with a low offer. And
disregard the “now-or-never” deadline attached to a collector’s counteroffer. It’s
a ruse to speed things up and recover more of the debt. Hang in there: experience
shows that the first settlement offer from a debt collector tends to be followed
by others, and that the offers are likely to improve over time.
- Know the statute of limitations on old debt. Debts of a certain age (generally
4-6 years) are “time-barred” from debt collectors’ lawsuits. Most people don’t know
this, and debt collectors take advantage of it. For the statute of limitations in
your state, refer to
this chart; get more detail by contacting your
attorney general’s office. The statute doesn’t mean you’re free of the
debt, but it prevents the collector from taking you to court to get a judgment.
Be careful: depending on the rules in your state, any payment you make on an old
debt may nullify the statute of limitations, making the balance “new” again and
collectible by lawsuit.
- Be careful how you pay. If you’ve agreed to pay a debt collector, use a method
that gives you proof of payment, but does not reveal your bank or account number.
A money order or third-party payer (e.g., PayPal) is advised by some debt specialists.
Stay in control: debt collectors will push for auto-pay arrangements, where you
authorize automatic debits to your bank account, but don’t be talked into it. There’s
no gain for you, and potential for abuse.
- Never give a debt collector personal information. Don’t answer questions
about your income, assets, expenses or liabilities. You’re not required to. And
don’t let your guard down at the settlement step. Once you’ve agreed to settle,
you’ll typically be asked to complete a “settlement application.” This is handled
matter-of-factly, as if it’s standard procedure and essential to settlement. It
isn’t. It’s a device to secure additional info, such as bank account numbers, social
security number, employer name, work phone, spouse’s cell phone, and so forth. This
information will be used for re-contact and future recovery action if the settlement
isn’t fulfilled. Don’t participate.
- Protect your Social Security or Disability funds. Keep Social Security or
Disability deposits in a dedicated (separate) bank account. Money from this income
is off-limits to debt collection lawsuits—as long as it’s identifiable. Mingle your
Social Security money with other funds and you’ll lose it if the debt collector
obtains a court judgment allowing seizure.
- Don’t get scammed. As collections activity has boomed during the recession,
so have scams offering relief. Don’t jump at ads for “credit doctors” or debt consolidators.
Their services are often fraudulent, or high-priced, or both. Investigate: there
are plenty of legitimate third-party agencies that provide interventions with creditors
to negotiate manageable payment plans—at no charge or low charge. To find a qualified
debt counselor in your area try the National Foundation
for Credit Counseling; or The Association of Independent
Consumer Credit Counseling Agencies
5 ways PeopleClaim can help you manage the debt collection experience
- Use Peopleclaim as a buffer. Suppose you want to stop a collector’s intrusive
phone calls, but still want to maintain communication to negotiate a settlement.
You can invoke your FDCPA rights and stop the phone calls, then file a PeopleClaim
against the agency. This gives you a neutral online channel where everything said
is on record and documented. Choose the certified mail option when sending
your claim to assure delivery and confirmation.
- Use PeopleClaim to get their attention. Among PeopleClaim’s options is the
ability to post your complaint online for public review and comment. (Your name
and location are not shown.) You can also have it sent to regulators and watchdogs.
Debt collectors don’t want to be in the spotlight, or to trigger an investigation
by the FTC, the CFPB, or an attorney general. To a debt collector, a claim that
will post publicly and is marked for forwarding to regulators has “danger” written
all over it. If they’re smart they’ll handle your case carefully.
- Use PeopleClaim to dispute a bill. If they’re dunning you for the wrong amount,
put that in your complaint. Choose the certified mail option and they will have
your verification request in writing (per the FDCPA requirement), which means they
must cease communication with you until the amount in question has been checked
and proven.
- Use PeopleClaim to negotiate a settlement. PeopleClaim’s online negotiation
channel allows offers and counteroffers, messaging, adding documents and exhibits—everything
you’ll need to come out with a favorable settlement—without being pressured for
decisions “right now” over the phone.
- Use PeopleClaim to document violations of the FDCPA. . If you’ve experienced
treatment prohibited by the Fair Debt Collection Practices Act, filing a PeopleClaim
and citing the specific abuses is a good way to document it. (You can enter dates
and incidents in any order and the PeopleClaim system will create a timeline for
you.) Such a claim shows the collection company you know your rights and that the
agency is vulnerable to prosecution. Remember, the debt they’re trying to collect
doesn’t go away if they’ve broken the law, but the violations you’ve documented
can affect how they handle your situation.
Looking ahead.
Though dealing with debt collectors is not pleasant, there’s
no reason to end up a harassed victim. By knowing what to expect, understanding
your rights, following the advice of consumer debt professionals, and taking advantage
of the PeopleClaim online negotiation and resolution tools, you can become an active
shaper of an outcome that will pave a faster and smoother way to financial recovery.