Money Talks, So Should You

3 smart tips for dealing with debt collectors

Gerri Detweiler
by Gerri Detweiler, Dimespring Contributor  (@gerridetweiler)

Getting collection calls can be terrifying. But you have more control and options than you realize. Stay cool and follow these steps:

Step No. 1:

Pick up the phone. Avoiding debt collection calls won’t make them go away. Have a notepad and pen handy when you talk with the collector so you can take notes. Keep calm and be polite – even if they aren’t. But instead of letting the collector ask all the questions, you should ask some, too.

To start, ask, “What is the name and address of the collection agency?” Another: “How much do you think I owe?” If you’re certain you owe the money and can afford to pay it, offer to make the payment by mail –- but only after they send you written confirmation of the debt.

READ: Talk your way out of credit card debt

Step No. 2:

Ask for written proof. A federal law, the Fair Debt Collection Practices Act, requires collectors to send you written notice of the debt. It also requires them to validate the debt if you ask them to do so. If you aren’t sure you owe the debt or that the amount is correct, or if you think it may be too old, dispute the debt in writing.

While you wait for that verification to arrive, check your facts and make a plan to resolve your debt, if you owe the money.

For example:

Not sure the amount is correct?

Contact the original creditor that placed the debt for collection and ask them what the balance was when you stopped paying. (That amount may also be listed on your credit reports if you can’t get an answer from the creditor.) Keep in mind the collector may be allowed to add additional fees or interest, but, in most cases a debt shouldn’t double or triple just because it went to collections. This does happen, especially with older debts where the collector may not have adequate documentation of the account.

Think the debt is too old?

Research the statute of limitations for that type of debt in your state online or by contacting your state attorney general’s office. In most states, creditors and bill collectors have a limited period of time, usually four to six years from the time you stopped paying, to sue you to collect. If a debt is too old, send the collector a letter stating that fact, and ask it not to contact you again.

READ: How to get out of debt

Can’t pay the entire amount right away?

Carefully examine your budget to figure out how much you can afford to pay so you can negotiate a settlement or payment plan. Debt collectors don’t get paid until they collect, so don’t be shocked if they refuse your offer to make very small monthly payments. But at the same time, you don’t want to agree to pay more than you can afford or you’ll just make matters worse. So know your bottom line and stick to it.

If you can come up with enough to make a lump sum payment of 30–50% of the amount you owe, the collector may be willing to settle the debt for less than the full balance. As with any negotiation, start lower than what you can afford so you have room to haggle. And be sure to get any payment arrangements or settlement deals in writing before you pay.

Finally, to avoid sending money to a fraudster, protect yourself by taking this additional step:

Step No. 3:

Make sure the call is not a scam. Millions of Americans are getting collection calls from scammers based overseas who try to extort payment by threatening arrest, lawsuits, wage garnishment or even violence.

READ: Six steps to a great financial plan

Follow this checklist to protect yourself:

1. Don’t wire a payment or give the collector your bank account number to withdraw payments from your checking account.

2. Request written verification of the debt and check with your state attorney general’s office to verify the collection agency is legitimate and licensed to do business in your state (if required).

3. Send payments by mail and keep records of the payments you have made.

Most debt collectors are just trying to do their job, which is to collect money the consumer owes. If you deal with them as professionally as possible, they’re more likely to deal with you the same way.

And if they don’t? You can always file a complaint with the Consumer Financial Protection Agency or hire a consumer law attorney.

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Gerri Detweiler loves to answer credit questions, which she does as Director of Consumer Education for Credit.com and host of Talk Credit Radio, a weekly radio program. Detweiler has been interviewed for more than 3,000 news stories on credit topics and co-authored five books, including "Reduce Debt," "Reduce Stress: Real Life Solutions for Your Credit Crisis" and "Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights."