Debt collectors have a thankless job – but one that needs to be done. With so many Americans falling behind on their financial obligations, lenders have little recourse but to attempt to collect what’s owed (unless it’s a secured loan with repossession as an option). According to the Federal Reserve, consumer credit increased by almost 5 percent last year. While there is no way to calculate the impact that bad loans have on our economy, statistics from June 2011 show nearly 10 percent of outstanding debt is in some way delinquent.
There are an estimated ten thousand collection agencies in the U.S. trying to set up repayment plans for consumers who have problems with debt, successfully recouping more than $8 billion in 2010. Debt collectors work on commission, and the more they can convince a consumer to pay, the more they will earn.
Every debt collector has heard heart-wrenching, humorous or simply unbelievable reasons for the financial trouble some consumers are in. And although they may be sympathetic, the hard-luck stories are irrelevant to their goal of getting consumers to pay. An honest debt collector will be fair and do their best help the consumer get back on the road to repayment with reasonable conditions.
However, unscrupulous collectors may use unlawful tactics to pressure consumers to agree to repayment. Important points that a debt collector may fail to tell you or actions they may take to confuse you include:
- A proposed repayment plan is negotiable. Collection agencies buy unpaid debt for pennies on the dollar, giving them a lot of leeway in writing up a settlement contract. If the starting figure for repayment is high, negotiate for a lower contract.
- A third party brought into the conversation may be a ploy. The theory is that two against one will intimidate and produce a quicker and larger repayment agreement.
- Total debt proposed may include debt you do not owe. The statue of limitations may have expired on some of your older obligations or you’ve already settled or paid it.
- Be aware of the risk of restarting the statue of limitations on your debt by taking action on the account – by making a purchase or payment or promise payment. A seven year limitation will begin at day one, no matter how much time had elapsed before the account activity. Some debts aren’t covered by the statues and include federal student loans, child support in some states, and income taxes.
- Collectors are not allowed to harass or threaten a consumer. Federal law makes it illegal to use obscene language or threaten violence when dealing with consumers. In other words, any action that is intended to intimidate is against the law. They’re also forbidden to calling before 8 a.m. or after 9 p.m.
You have the right to stop the collection calls by simply sending a letter asking the collector to stop and they must comply. Debt collectors that fail to comply should be reported to your state attorney general’s office and the FTC. And if a caller threatens arrest, reveals details about your debt to your friends, neighbors or family, or fails to comply the restrictions, contact your states attorney general’s office to file a complaint.
Be confident in your position. Before you agree to pay an old debt, first make sure you actually owe the debt. And never settle before you are sure it’s in your best interest and that you can honor the agreement.
* Before you deal with a debt collect, consider debt settlement services.