If you’re receiving phone calls and threatening letters from an aggressive debt collector, you’re likely feeling overwhelmed. After all who is this company now contacting you, and how did they come to be in possession of your information.
Negotiating the world of debt collection as a consumer is far from an easy task. There’s a multitude of laws and consumer rights protected by the Fair Debt Collection Practices Act (FDCPA). However understanding your rights and then persuading the collection agencies to respect your rights and to follow federal regulations and rules, is virtually impossible as an average consumer.
The purpose of this article is to give you an inside look at how exactly these shark filled waters of debt collection work. Along with tips on how you can best navigate these waters, and avoid getting bitten.
Debt Collection Tactics
Before we discuss your rights, we need to share with you exactly what debt collectors can do to try and pressure you to make a payment. First they’ll obviously begin contacting you by phone and written correspondence requesting you make payment.
Next they’ll report negative information about you to the credit bureaus. This will in turn create derogatory, and damaging listings on your credit report, which will lower your overall credit score.
After about six months or so, they’ll sell the collection rights to your debt to yet another collection agency and the process will repeat. Ultimately a frequent outcome is debt collectors will file a civil lawsuit for repayment.
This can result in a judgement against you which will decimate your credit score. Depending upon your residence this can lead to your wages being garnished and possibly liens being placed against you, and your property. Naturally we strongly encourage you to address this issue immediately to avoid these common paths of credit destruction.
The FDCPA is federal legislation that regulates debt collectors and their behavior including what they can legally say, and how they can contact you during the collection process. We encourage you to full investigate this legislation and a few highlights include:
- They can’t lie, threaten, curse, or insult you.
- They can’t misrepresent themselves or their purpose.
- They can only call you between 8 a.m. and 9 p.m.
Of course there’s many more rights you’re given with the FDCPA. The cold harsh truth is just because laws exist doesn’t mean everyone follows them, after all innocent people are still being put in jail for committing crimes.
The debt collection industry is endemic with law breakers. This is evidenced by the fact that the Federal Trade Commission (FTC) is consistently issuing fines to collection agencies. If your rights have been violated you should report this to your state’s Attorney General, the FTC, and the Consumer Financial Protection Bureau.
How To Fight Debt Collections
The first place to start with fighting debt in collections is with the statute of limitations. This is a legal time window for which your responsible for repayment. Once this time expires then the debt is forgiven.
The statute of limitations will depend upon your residence, so please investigate this further. Additionally it’ll depend upon the type of debt. For the vast majority of accounts, you’ll typically be looking at about seven years. However there are a few exceptions including federal student loans where the statute of limitations doesn’t apply.
If your account is within the legal time frame, you’re next step is to request debt validation for your account. This is your right protected by the FDCPA, and this request should be made in writing using certified mail. It’ll require the collection agency to respond by providing you with evidence and documents that proves your debt is legitimate, and they’re the legal rights owner.
If your account is not validated then you’re no longer legally responsible for it, and the debt collector is required to notify the credit bureaus to have them remove collections from credit report files, on your behalf. If your account is validated then you’ll need to move on to the next step.
With a validated account, and assuming it’s within the statute of limitations you’re next step is to negotiate a settlement agreement. This should always be for much less than the total balance they’re contacting you for payment upon.
Experts say you should start your offer at about 15% of the balance, and you’ll likely need to settle at around 40% of the total balance. Collection agencies will be more than willing to negotiate with you and accept a settlement for less. This is because they’ve purchased the rights to your account for just pennies on the dollar.
It’s mission critical that as part of your settlement agreement you get the collection agency to agree to stop reporting your account information to the credit bureaus, in exchange for your payment. If you neglect to get this agreement, then upon making your payment the collection account on credit report will only be changed to a paid collection.
This is not a positive item to have on your credit report, and it won’t build credit. With the agreement that they’ll stop reporting your account information, you’ll be able to remove the negative items on your credit report with the next step.
The final step is to file a credit report dispute. This is how you challenge and potentially remove bad credit on your credit history. This is your right granted by the Fair Credit Reporting Act (FCRA).
Once the credit bureaus receive your dispute and find it valid then they’ll conduct an investigation. They’ll contact the debt collector and ask them for verification of the account, the balance, dates, and any other applicable information.
As per your settlement agreement the collection agency won’t verify your account with the credit bureaus, and the FCRA says any item the credit bureaus can’t verify must be removed from your credit report. This is how you go about removing collections from credit report files.
Look dealing with debt collectors is far from a pleasant experience or consumer friendly. One of their smarmy tactics include “re-aging” consumer debts and this is frequently done simply when consumers acknowledge a debt. This enables the collection agency to continue reporting negative information about you to the credit bureaus. Along with continuing to contact your for payment.
It’s imperative that you enter these shark filled waters with knowledge, power, and often a professional credit repair company at your disposal to enforce the rules. Of course you can negotiate with debt collectors yourself, however if you pursue this path please invest some additional time learning your rights and the regulations placed upon the collection agencies.
We encourage our members to consider professional credit help. Because in just 2016 over 9 million negative items were successfully removed from consumer’s credit reports.
One of the best credit repair services are the Credit Pros. They’ve helped their client’s remove collections, late payments, charge offs, judgements, liens, and many more negative credit report items.
Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies on how to improve my credit score with Dan Willis, sign up for our free newsletter and join our congregation.
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