How to Deal with Debt Collection Agencies

If you’re behind on your bills—or a creditor’s records mistakenly indicate that you are—debt collection agencies may contact you. These calls can be scary, stressful, annoying, or even a surprise. You may not know how you’ll come up with the payment or the debt collector may be so aggressive that you’re thrown off-balance by the interaction. Try to stay calm and remember that the person on the other end of the phone is just doing their job of getting the payment.

Understanding the world of debt collection agencies will help you become aware of your rights, find ways to handle the situation, and discover possible solutions to help put an end to the phone calls.

What is a collection agency?

Once your account with a creditor has been unpaid for a certain amount of time, they may determine that the money you owe them is still worth the time and resources they’re spending to get it back. Some do this when an account is 30 days past due, others do it at 120 days, while some creditors have a different formula.

This means the creditor either sells the debt to the collection agency or hires them to collect on your debt on their behalf. Either way, by charging off your debt, the creditor won’t get the full amount owed. However, they’ve decided it’s worth it to no longer have it on their books.

Once your debt has been charged off to a debt collector, they will take over trying to get you to repay. Not surprisingly, they’ll continue to require payment on the full debt amount so they can make as much money as they can. They may use aggressive tactics to pressure you into paying, including frequent phone calls, which can be stressful.

How do debt collection agencies impact your credit?

As described above, a creditor usually won’t sell your debt to collections until after it’s already gone “past due,” which means your credit has already been flagged and credit bureaus are already aware that you’re delinquent on a bill. It is likely that this “ding” will reduce your overall credit score. However, a collection agency won’t impact your credit score.

There’s no clear formula for how much your credit score might be impacted by going past due. For someone with a FICO score of 780 who has never previously missed a payment on any credit account, a 30-day delinquency could cause a score reduction of up to 110 points. Yet someone with a 680 FICO score and two previous late payments (one from a couple years ago and another from a year ago) and now a new delinquency may only have a drop of between 60 to 80 points.

What to expect when debt collection agencies call

Debt collection agencies have a bad reputation—and for good reason. When you’re already stressed about money and trying to make ends meet, their relentless tactics and aggressive behavior over the phone can cause anxiety.

In fact, 27 percent of consumers who had been contacted by a debt collector reported feeling threatened and 36 percent stated they received late-night or early morning calls, according to the Consumer Financial Protection Bureau’s 2017 Survey. In addition, the agency might pad the debt owed with their own fees, saying that you owe more on the debt than you actually do. And worse: they could be calling you about a debt you don’t even owe.

Their only goal is to get you to pay, so they’ll do whatever it takes to reach that goal: call you multiple times every day, send letters, threaten lawsuits. While some unsecured debts—such as medical or credit card bills—have a statute of limitations after which a debt becomes “expired” (or time-barred), this does not mean that you no longer owe this debt. A collection agency may still seek payment on any unpaid obligations, but you cannot be sued for payment on an expired debt. Note that every state has its own statute of limitations on debt.

When is a debt collection agency stepping over the line?

Disreputable agencies will apply inappropriate tactics. By knowing your rights and being aware, you can call them out for bad behavior, plus report them to the Better Business Bureau as well as the original creditor.

Before you pick up the phone, it’s good to understand which strategies collection agencies use, what they can (and cannot) say, and what may be inappropriate or illegal action. Although they may call you at work, it’s illegal for them to visit your workplace to try to collect payment. Plus if you tell the debt collector to stop calling you at work, they must stop.

Other things a collection agency cannot do:

  • Misstate the amount you owe
  • Claim you’ve committed a crime
  • Indicate paperwork they send is a legal form when it is not
  • Indicate paperwork they send is NOT a legal form when it is
  • Call you before 8:00 AM or after 9:00 PM, unless agreed to by you
  • Falsely represent themselves as an attorney or government worker
  • Misrepresent that they operate/work for a credit reporting agency
  • Harass you by threatening violence, repeating calls, publishing your debts or other information about you, or using abusive or obscene language

If you think a collection agency might be making any of these violations, contact a consumer protection lawyer to see if you have any legal recourse. You have rights as a debtor, and there are legal consequences for creditors and collection agencies who violate your rights.

How to handle calls from collection agencies

Each time you receive a call from a collection agency, save the number into your phone so that you can know who is calling the next time. Take thorough notes about everything they say so you will be able to refresh your memory on what they’ve already told you so you’ll be better prepared to respond in a calm manner. Thinking of your responses ahead of time should help you feel in control and negate their aggressive tactics.

You can try to negotiate the debt amount, but they will pressure you to pay more than you want. Explain to the debt collector that you are unable to pay them at this moment, yet will make sure they are paid. Never offer too many details on why you can’t pay them right now. Not only is it none of their business, they could use such details against you to try to get a commitment for payment.

If you truly can’t afford to pay anything on a debt, then write a letter that includes your account number and ask them to stop calling, writing, or visiting your home in an attempt to collect the money they claim you owe. Once the letter has been received, the original creditor can still contact you, but the collection agency must stop requesting payment.

If a debt collector is making you angry, stressed, or frustrated, then get off the phone. Tell them they can call later, once you’ve had time to think. Take some time to decompress, gather your thoughts, and prepare. Ignore their calls until you’re ready to talk with them again.

What if you don’t owe what they say you owe?

Inaccuracies do happen. For instance, you may have already paid the creditor, the charge has been dismissed, or the collection agency may have contacted the wrong person. This issue isn’t uncommon.

When you doubt a debt you’re being asked to pay, first check your credit report. It’s free to order your credit report once per year or by directly contacting the credit reporting bureaus: Equifax, Experian, and TransUnion. Each report lists your current and past credit card, loan, and debt accounts, along with your payment status. Check your credit report for any errors and request that the credit agency correct any errors.

Some errors you might see on your credit report are outdated or false debts. An outdated debt is one where it has been at least seven years since the original delinquency of the debt. You have the right to disagree with a charge. If you find an error on the report, then file a dispute with the credit bureau.

To dispute a charge and have the collections information removed from your credit report, send a letter to the original creditor, credit bureau, and the debt collection agency. Include the following:

  • Reason for disagreeing with the charge
  • Original receipt/billing statement
  • Proof that either the debt is not yours or proof that you already paid it

Additionally, send a letter to the agency and include all of the above, plus:

  • Tell them you don’t owe money
  • Ask for verification of the debt
  • Inform them to stop contacting you

If they send written verification of the debt, such as a copy of a bill for the amount you owe, then they’re legally allowed to begin contacting you again.

Can you settle a debt with a collection agency?

One of the best strategies to deal with pressure from debt collection agencies is to negotiate. Since they paid significantly less than the original amount of your debt—pennies on the dollar—they may agree to settle for less than the amount originally owed. However, if you take this route, be sure to get an agreement in writing that shows the debt to be considered paid in full for the agreed-to amount.

The biggest downside of negotiating with debt collection agencies is that it can be very time-consuming and stressful. That’s why some people choose instead to have a professional debt negotiator do it for them, by enrolling their debts into a debt settlement program. While this may not stop the phone calls right away, the calls should fade away as the debts begin to get negotiated and settled.

Other ways to resolve debt

If you’re getting calls from debt collection agencies or just worried about your debt, it might be time to take action. Freedom Debt Relief is here to help you understand your options for dealing with your debt, including our debt relief program. Our Certified Debt Consultants can help you find a solution that will put you on the path to a better financial future. Find out if you qualify right