A debt collector is hounding you, seeking payment on a consumer debt you owe. Debt collection tactics can be annoying at best — and predatory or even illegal at worst.
It’s crucial to know how to handle debt collectors so you can assert your rights and choose the best way to manage your debt. Before you say anything or make any payments:
- Think before you act, to avoid making the situation worse.
- Gather the facts.
- Know your rights.
- Plan how you’ll deal with the debt.
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Here’s what you need to know about debt collection, plus strategies for handling debt collectors.
What to know about debt collection
When a debt goes unpaid for a period of time, usually starting 30 days after the due date, it may be reported as delinquent. At some point, usually after 180 days, the creditor — such as a credit card company, bank or medical provider — gives up on trying to collect. It may sell your debt to a third-party debt collector in order to get at least some money and take the debt off its books.
Before, you were getting bills from a creditor you recognized. Now you’re getting debt collection notices from a different company. You still owe payment on the debt, but a third party has bought the right to collect.
You’re not alone: 35% of Americans, or about 77 million people, have a debt in collections on their credit report, according to a 2014 report by the Urban Institute.
A debt in collections will leave a mark on your credit report for up to seven years, making new lines of credit harder to get and more expensive.
How to handle a debt in collections
1. Think before you act
Just as you wouldn’t jump into a contract without understanding its terms, don’t rush to make a payment when a debt collector contacts you. Take time to think through your options.
“A lot of people are ashamed of having their debt, and that’s what debt collectors prey on,” says Ramon Khan, a former debt collector from Texas who now works in online marketing.
“They create that urgency and prey on those pain points to get you to pay something. At the end of the day, if you owe $50,000 or $100,000, they don’t really care that you’re going to pay all of it. If they can get you to pay part of it, that still works toward their quota.”
Strategy: Don’t give in to pressure to pay on first contact.
Making even a single payment — even just $5 or $10 — is an acknowledgment of the debt and can have serious repercussions. If the debt is past the statute of limitations, for example, making a payment will reset that clock and could lead to a lawsuit or wage garnishment.
Don’t pay, don’t promise to pay and don’t give any payment information the collector may use later. Ask for information on the debt and say you’ll call back to discuss it later.
2. Gather the facts
As debts are sold by the original creditor to a third party and potentially resold many more times, record keeping often falls by the wayside. Many sold debts have errors about the amount owed or even who owes it.
Debt collection practices are the largest source of consumer complaints to the Consumer Financial Protection Bureau as a result. Over 85,000 complaints were filed in 2015; the biggest reason was consumers being asked to pay debt they didn’t owe.
Strategy: Gather information from the debt collector and your own records.
- Request a validation letter from the debt collector if you don’t receive one within five business days of first contact. It should include details on the debt, the collection company and how to challenge the debt.
- Gather your own records on the debt, if it’s yours, including information on the original creditor and your history of payments.
- Keep good records of communication with the debt collector and any payments previously made. You may want to use certified mail for the best documentation.
3. Know your rights
The Fair Debt Collection Practices Act is your ally. This law outlines your rights as a consumer and shields you from predatory collection tactics. For instance:
- Communication: You can request how and when debt collectors contact you — including that they cease communication altogether. Debt collectors are prohibited from using profane language or threatening violence.
- Honesty: Debt collectors cannot mislead you about who they are, how much money you owe or the legal repercussions of not paying your debt — for instance, by threatening arrest.
- Challenging the debt: You have a right to dispute the debt. If you challenge the debt within 30 days of first contact, the collector cannot ask for payment until the dispute is settled. After 30 days you can still challenge the debt, but the collector can seek payment while the dispute is being investigated.
Your state may offer additional consumer protections. Check with legal aid in your area or your state attorney general’s office.
You may want to file a complaint with the CFPB if your protections under the law have been violated.
Strategy: Brush up on your consumer rights — and know how to use them.
- Understand your federal and state protections in the debt collection process. Your state’s attorney general and the Federal Trade Commission are informative resources.
- Whether it’s sending a letter to debt collectors to request more information on the debt or demanding that a debt collector cease contact with you, know how to exercise your consumer rights — and don’t be afraid to do so.
After you’ve taken time to survey your debt and brush up on your consumer rights, compare the options for handling a debt that’s in collections:
- Look into ways to pay off the debt.
- Challenge it. Read the validation letter from the collector for information on how to dispute the debt.
- Pursue a debt relief option, such as credit counseling.
- If your debts are unmanageable and you see no way to pay them off within five years, you may want to consider bankruptcy.
Assess how each option would affect your finances, and seek legal advice or credit counseling if you need help.
Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org.
This article was updated Oct. 21, 2016.