5/15/2012 3:56 PM ET|
8 things debt collectors won't say
The calls may be scary, but you do have rights you should know about. Here are some things to know before you decide how to respond.
It should come as no surprise that if you fall behind on your bills, you may hear from debt collectors. If they do call, you will almost certainly hear that you need to pay them and that you need to do so immediately. But there are a number of things that they aren't likely to tell you, and knowing these things can make all the difference in resolving your debts.
1. Some of our threats have no teeth
If you can't pay the collector the amount he is demanding, or refuse to give your bank account or debit card number to make the payment, the debt collector may threaten to "put you down for 'refusal to pay.'" But that's "a meaningless phrase in the debt collection world," says ZipDebt.com founder Charles Phelan, who coaches consumers trying to settle debts. He elaborates:
"When a collector says, 'We are going to inform your creditor that you are refusing to pay this bill,' they are just using reverse psychology. Your creditor has already figured out that you aren't paying the bill, or they would not have sent your account to a collection agency in the first place."
Another example? Bogus deadlines. Says Phelan, "Collectors will always try to create a false sense of urgency by imposing a series of deadlines, after which 'this deal will no longer be available.' The reality is that settlement or workout offers tend to improve over the course of a typical three-month collection assignment."
2. We have to stop bugging you at work if you tell us to
The Fair Debt Collection Practices Act is very clear on this point. Once you tell a debt collector that your employer doesn't allow you to talk with her while you are at work, she must stop calling you there. Yet in its 2011 Annual Report to Congress about Fair Debt Collection Practices Act complaints, the Federal Trade Commission noted that in 2010 it received 17,008 complaints related to debt-collection calls to consumers at work, up from 11,991 complaints the year before. "By continuing to contact consumers at work under these circumstances, debt collectors may put them in jeopardy of losing their jobs," notes the FTC.
3. We can't blab about your debts to others
Debt collectors are generally allowed to discuss your debt with only you, a co-signer, your spouse or your attorney. They may not discuss your debt with neighbors, relatives who aren't obligated to pay the debt, or co-workers. In fact, they are generally allowed to contact third parties only to locate you, and once they have found you, contact with third parties must stop. Consumer lawyer Sukhman Dhami of the Dhami Law Firm, explains:
"We call these 'third-party disclosures,' a violation of Section 1692c(b) of the Fair Debt Collection Practices Act, and they are exceptionally common, particularly when the debt collector leaves a message on a public answering machine. These public answering machine violations are called 'Foti' violations after the landmark case Foti v. NCO Financial Systems, 2005.
"If a debt collector leaves a message for you on any conventional answering machine or any shared/open-access voicemail system, they are likely to violate the third-party disclosure restrictions per Foti, so save any machine message and/or voicemail which a debt collector leaves for you!"
He goes on to warn, "If a debt collector contacts third parties, we want to know about it, because chances are that the collector violated one or more provisions of the FDCPA."
4. Your debt may be too old for us to do anything about it
"Stale debt is not collectible," advises Atlanta bankruptcy attorney Jonathan Ginsburg. "Every state has a statute of limitations that makes debt of a certain age not collectible. Debt collectors are not currently obligated to advise you that they cannot sue you or legally ding your credit report if you refuse to pay stale debt."
In most states, the statute of limitations runs four to six years from the date you last made a payment. And that's the catch. "In some states, a voluntary payment on a stale debt can revive the debt and make it legally collectible," Ginsberg warns. But don't be surprised if you hear about a very old debt. "Stale (or zombie) debt is big business," he adds.
"Seniors are constantly targeted for old debts," says Alex Viecco of New Era Debt Solutions. Viecco says his firm is seeing a trend where debts that were the result of identity theft are "coming back around for consumers. They certainly do not remember it, and suddenly (collectors) act as if it was theirs." He says his firm also hears from clients who complain about old medical debts that should have been paid by the insurance company and resurface years later.
"Never admit to any debt without first getting more details," recommends Viecco. At a minimum, you want to establish that the debt is legitimate, you owe it, the collector on the other end of the phone isn't a scammer, and the statute of limitations hasn't expired.
At the same time, don't assume that just because a debt is older it can't be collected, or that it can't affect your credit reports. "There are a handful of states that do require the collector to tell the consumer that they cannot be sued," says Mark Schiffman, director public affairs for ACA International, a trade organization for collections professionals. "While it is true that every state has a statute of limitations, which varies by state and by debt type, and that a collector may not sue or threaten to sue a consumer, the collector may still seek to collect the debt from the consumer so long as it is within the guidelines of the Fair Debt Collection Practices Act." He also notes that under the Fair Credit Reporting Act, collection accounts may be reported for seven years.
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5. We are under pressure to collect, just as you are to pay
Collectors "work on sliding scale commissions, and the quicker they get someone's money, the higher the commission," says Philadelphia debt-collection abuse lawyer Michael Forbes. "If they don't get your money within a fixed period of time, your account will be sent back to the creditor."
So while collectors may pressure you to pay right away, staving them off a bit might work in your favor if you can't afford to pay the full amount you owe. "Collectors will generally not share that they may take a lower settlement offer at the end of the month in order to meet a quota, or nearer the end of the assignment contract when the creditor is going to pull the account back," says Michael Bovee with DebtConsolidationCare.com, a free, online debt-advice community website that includes sample debt collection letters. He explains that most assignment collection accounts (where creditors assign debts to collection agencies rather than selling them) stay with collectors for 90 days. Any accounts that are not collected at that point may go back to creditors, usually to be placed with another collection firm.
And while collectors may insist that you pay the full balance you owe over time, they may actually prefer to get a smaller, lump-sum payment, says Phelan. Why? "They get paid commissions much faster that way!"
6. If we really want to play hardball, we will have to sue you
If you owe unsecured debt such as credit card debt, collectors must typically sue you before they can go after your property, including money in your bank accounts, or try to garnishee your wages. Threatening to take such actions before they have sued you and won a judgment may be illegal. Even threatening to sue you to collect a debt may be illegal if the collector has no intention of doing so.
The FTC reports that in 2010, more than a quarter of all FDCPA complaints reported that third-party collectors falsely threatened a lawsuit or some other action that they could not or did not intend to take. In addition, 18.6% of FDCPA complaints alleged that such collectors falsely threatened arrest or seizure of property. No doubt some of these complaints involved overseas payday loan collection scammers. Still, some involved calls from collectors in the U.S. trying to collect legitimate debts.
"Debt collectors use applied psychology to persuade and threaten consumers to pay debt," Ginsberg explains. "Often this psychology involves veiled threats of criminal action or litigation when these options are not available."
7. Paying off this debt won't help your credit scores
Under the Fair Credit Reporting Act, a collection account will remain on your credit reports for seven years and six months from the date you fell behind with the original creditor. Collectors may make it sound like paying off collections account will improve your credit, by telling you that they will update your credit report to "paid in full" status. But this probably won't help your credit scores. Collection accounts are negative, whether they are paid or not.
In an article titled "Will paying a collection improve my credit score?" Credit.com's credit scoring expert Tom Quinn wrote:
"The fact that a collection account is on your credit report (regardless of balance) is, in and of itself, predictive of future risk, as research shows that consumers with collection accounts on their credit report are less likely to pay as agreed in the future than consumers with no credit report blemishes."
On the other hand, paying the collection account may stop the creditor or collector from suing you, and a judgment on your credit report could hurt your credit score even more. Additionally, some mortgage lenders may require you to pay or settle collection accounts before giving you a loan.
8. You probably don't have to pay your deceased relative's debt
"Collecting debts of the deceased is a growing and lucrative business. Creepy, huh?" says Mary Reed, the co-author of more than 20 legal and financial books (including the book she co-authored with the writer of this article, "Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.") But generally, she points out, you aren't responsible for the debts of relatives who died unless you were a co-signer, or the debt belonged to your spouse who died and you live in a community property state. Creditors or collectors may try to collect from the estate, if there is one. If the person left nothing, however, then they may simply be out of luck. Although they are supposed to tell you that you don't have to pay the debt, they may conveniently leave that out or gloss over it.
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I am retired. At one point I had a mountain of debt. It was only with a monumental effort over a number of years that I was able to get debt free. Now I have no debt other than a three year car loan.
You cannot retire, if you have debt. Your income is lower, usually much lower, and your prospect for getting a decent job is just about nil. It is financial suicide to borrow money for anything other than absolutely necessary high price items like a house or car.
If you want to avoid dealing with bottom feeder bill collectors, lower your standard of living a bit and live within your means. You need food, water, and shelter. You don't need $70 a month cable TV or $50+ a month cell phones. You probably need a car, but you don't need an expensive one or one with all the bells and whistles.
Bottom line - If you stay out of debt, you will have more money to spend, you won't get hassled by bill collectors, and you will sleep better.
When my husband was dying of cancer, we lost everything. Two weeks before he died,a collector tlod me I would lose ourhouse over a 3,000.00 credit card debt. He claimed to be a lawyer.I doubt he was.
A week after my husband died, he called again. He didn't beleive my husband had died or had been ill.
I tore hima new one.
If you are a senior and have ss retirement ,state or municipal retirement.Its ALL exempt which means--it cannot be touched by ANYONE but the FED or state for back payment such as taxes.In essence, it's government.Fed. State or Local ( Municipal and county).Lastly.MY phone is MINE and "I" answer it for WHOM ever "I" please and "DON'T" for whom ever "I" please.I NEVER answer ANY 800 numbers.Or UNKNOWN callers.ALL the above means debt parasites.
Keep your paid off receipts forever!! Now I have collection agencies saying I need to pay of the same debt when I paid it off 4 yrs ago or more. I threw out any evidence being as old as they were and now this crap is going right back on my credit report. The old collection agencies sold them off even after they were closed or just right before. the new ones hold on to them for a few years and hit you right back. 2 of these just happened to me this week!
So this is another thing collection agencies DONT tell you!!
CITIBANK gave my account to collection, even though I had the account for 10 years and had never missed a payment. When the collector called me, I was shocked and asked how far he showed I was behind. After looking at the account he, too, was puzzled because I had never missed a payment. I've tried to call CITIBANK multiple times. When I finally get in touch with someone, they won't talk to me because my account has been sent to collection! Go figure!!!! I've told the collection not to call me again and they haven't. I keep making my payments to Citibank but, to be honest, I don't even know who has my account now!
Interesting I just recived a letter claiming I owe some bills from 1999 and 2001
I called my friend who is oddly enough a collection lawyer, (working for collection agencies)
He couldnt actually help me, but he said he would write a letter stating the debts are violations of state and federal laws, because they are too old, It dosent even matter they are not my debts anyway.....
These people really mess with the hardest hit folks. older folks, people who lost jobs, got injured. I think most people are honest, and just recently I had to choose what to pay, because I just ran out of money for the week. completely ran out, so my last few bucks went to food and gas, so I could feed the kids.
till I got paid 3 days later...Its a tough world
1. They never sue
2. Paying a collection agency can never help credit rating - once it goes to collection there is no advantage to pay anything
3. they have paid cents on the dollar to buy your debt - if you want to pay them, offer them 10-20% max
4. Debt reduction companies do LESS than you can do yourself (50% of what is owed? a collection agency will offer that to the debtor without any need for a debt reduction agency and with no extra fee)
5. statue of limitations is tricky: if you send the agency anything - the statute starts all over again; even talking to them or writing to them can trigger the statute all over again - just say nothing and hang up.
We need legislation in this country regulating all aspects of the credit card debacle in this country, from the original application for credit, to the interest rate charged, to fees and penalties assessed, to collections. There are plenty of rules and regulations for the customer and the banks can almost virtually do whatever they want when it comes to credit cards and it has gone on far too long.
Fifteen years ago 20 year old college students would get credit card applications in the mail by the bucket load, put down a household income of $80,000 which was about 4 times more than what was accurate, and a week later get a platinum card with a credit limit of $20,000, which was probably spent within a year. I personally have applied for credit cards and was asked how many extra cards I wanted printed for family members, with no mention of a credit check whatsoever for whoever else I was supposed to want a credit card for. You can have a spotless payment record for years and then miss a payment or two and next thing you know you are receiving not just a few but a hundred calls a month from some idiot collections dept person who can do nothing more than treat you like a piece of dirt and talk to you like you are the scum of the earth.
People are going to make mistakes, other people are going to use cards not intended for their use, things are going to happen that are beyond the cardholder's control. The days of giving virtually anyone a credit card with a huge credit limit are over but we're all paying for it, one way or the other. 90% of the debt collectors out there don't want to work with you, don't care, and live for nothing more than getting money and hoping they can totally ruin your day. Communicate with them through certified mail only and make yourself aware of what your rights are when it comes to debt collectors. Half of them are trying to make a buck and don't have the slightest idea what constitutes a good collections agent who will work with you and treat you like a human being and the other half are trying to make a buck and are just plain morons.
the law is really all on their side, most of the calls may be legit. But some are scammers, and you have no way to know either way. Never talk to them, if you do dont admit to any debt (whether it is yours or not), and NEVER NEVER give them any personal Information, or pay over the phone. Best Thing to do is never answer the phone. If you intend to pay the debt call your Creditors and make Arrnagements, even if you cant pay, call and say "i cant pay this month sorry".
One scammer call on "Old" or "Not your debt" can ruin your finances.
I had an old consumer loan that I had paid off more than 10 years before I received the Call from a Rogue collector. He was Threatening had to pay loan back now, or they would sue. I had the payoff receit, I keep everything. I Hung up on the collector, called a Lawyer, who in called the collector back on my behalf, and Threatened back > go ahead and sue I have the payoff receit for said debt in hand and he will own the company< it was great. KEEP ALL PAYOFF RECEIPTS.
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