In the course of life, anyone with a debt account may have at least one account go into delinquency as a result of life circumstances. Many situations, from a medical emergency to losing a job, can force Americans to make difficult decisions about who gets paid when. Those facing this situation should remember they are not alone. In a 2014 study completed by the Urban Institute, 77 million Americans – or one in three people – had at least one delinquent account.
While a minor delinquency can result in an account being closed, a major delinquency of 180 days or more can result in the debt being sold to a collection agency. If you are contacted by a debt collector for a delinquent balance, there is no reason to panic. Instead, everyone can get through a debt collection activity by staying calm, understanding their rights, and making a plan to get through the collection.
Collect the Facts: Who, What, When and Why
When a debt collector first contacts an individual, they may attempt to use many tactics to either coerce the individual to admit responsibility for the debt, or commit to making any payment on a debt. When an individual commits to either action, they could ultimately be responsible for that debt until it is satisfied.
Before engaging in any conversation with a debt collector, it is important to collect all the pertinent information about why you are being contacted about the debt. The facts should include who the debt is from, what the debt is for, when the debt became delinquent and why you are being contacted today by the debt collection agency. From there, request a written statement on the debt before engaging in any further discussion.
Request Debt Information in Writing
Under federal law, debt collection agencies must provide a debt validation letter within five days of the first telephone contact. If a debt collector calls before a debt validation letter is sent, the first conversation should start with a request for this information.
A debt validation letter will provide in writing all the details of the alleged debt, including the bank it was purchased from and the amount owed. With this information available, individuals who are facing collection on a delinquent account have several options as to work with collectors moving forward.
Make a Plan to Handle the Debt Collectors
Of all the financial inconveniences Americans face on a daily basis, the most inconvenient of those may be dealing with debt collectors. However, there are several options everyone can take in order to mitigate their contract with debt collection agents.
First off, every individual who is facing collection on a delinquent account has the right to challenge the alleged debt in writing. Under federal law, individuals are allowed to contest the debt in writing within 30 days of the first contact from a debt collector. During this time, a debt collector is not allowed to contact the individual until all disputes on the alleged amount facing collection is complete. Although individuals can contest the debt after the 30-day contact mark, the debt collection agency is still allowed to seek payment.
To contest the debt, individuals can use their bank records and payment history to negotiate the amount being collected. Furthermore, without continual contact from a debit collector, individuals have more time to determine a plan of action to handle the debt.
Know Your Rights Under the Law
While debt collectors and debt collection agencies can be difficult to deal with, consumers have more rights than they often know about under local, state and federal laws. Through understanding these protections, everyone can best manage their relationship with debt collectors.
The Fair Debt Collection Practices Act, passed into law in 1977, governs individuals’ rights when it comes to attempting to collect a debt. Under the law, individuals can dictate when and how debt collection agencies contact them. Furthermore, under the act, those who have the alleged debt can ask the collectors to not contact them at all by phone.
In addition to how debt collectors contact those with delinquent accounts, federal law also provides guidelines on when collection agencies can contact individuals. Debt collectors can only make phone calls between 8 a.m. and 9 p.m. local time, unless the individual gives expressed permission otherwise. Contacting outside of these hours can result in penalties for the debt collection agencies.
The law also provides guidance on how debt collectors can represent themselves during a phone conversation. A debt collector cannot misrepresent themselves or their motives, nor can they claim they are from a government agency. A debt collector are also limited in how they speak with individuals, and cannot use threats of arrest, violence, or other forms of intimidation to collect a debt.
Many states and counties also have individual laws governing the collection of debt. If you are facing a debt collection attempt on a delinquent account, be sure to contact your state Attorney General’s office or law aid society for assistance in understanding local laws.
Finally, it is important to understand all the options for paying the alleged debt off. Although paying the balance in full is one option, other options exist to help individuals get through this difficult situation.
First, individuals can attempt to negotiate a settlement of the debt. When a debt is transferred to a collection agency, it has oftentimes been purchased for a fraction of the amount owed. As a result, debt collection agencies can negotiate on the settlement. While this may be an easy way to pay less than the owed amount, a settled amount can still stay on credit reports, or have tax implications.
Another option is working with the collection agency is to set up a payment plan to pay off the debt. Through a payment plan, individuals can pay off the debt they owe, without facing the possibility of wage garnishment or other penalties. Those who can afford to pay off the debt entirely can also negotiate a “pay-to-delete” agreement, where the debt collection agency agrees to delete the collection from a credit report for a full and final payment.
Before agreeing to a negotiation or submitting a payment, request the agreement be provided in writing. Through a written agreement, individuals can prevent any problems moving forward, or future attempts to collect on the same debt.
If paying off the debt is not an option, there are other remedies individuals can pursue. Additional remedies to prevent collection include credit counseling or bankruptcy. By entering into a credit counseling agreement or going into bankruptcy, individuals can stop the debt collection process and end future collection attempts. However, each of these options can have negative effects as well, including adding negative marks on a credit report for up to seven years.
While working with debt collection agencies can be difficult, you are not alone in the process. By understanding all your rights and options, the process of debt collection can be an easier and very temporary process.