Several Pieces Of Mail With One Past Due Notice

8 Things Debt Collectors CAN’T Do

Your quick guide to successfully dealing with debt collectors

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If you’re being hounded by debt collectors, keep reading.

Collectors run the spectrum from annoying to predatory. Those constant calls can create a permanent knot in your gut and keep you stuck in anxiety and stress. Debt collectors prey on all of the negative feelings you have about being in debt. They can make anyone feel like a criminal and a deadbeat.

All they care about is meeting their quotas with no care about how they do that… or even if a debt is legitimately yours.

But there’s a limit to what collectors are allowed to do… and many of them cross the line into illegal tactics.

Instead of freaking out when they call, let’s turn the tables on them. When you know your rights and you know the right things to say, you can get collectors off your back and negotiate from a position of strength.

The Right Way to Respond to a Collector Is Not Paying

When you get a call or a letter from a debt collector, you’ll probably either respond or ignore it. Both of those options are mistakes, and both can come back around to hurt you.

If you communicate at all with the collector about the debt or if you pay any amount (even $5) toward the debt, you have officially acknowledged the debt. If you ignore every communication, which may include court summons, you could end up with a judgment against you that allows the collector to garnish your wages.

The right way to handle collections is to start by requesting a validation letter. The collector must provide it within five business days of the first contact. That letter has to include:

  • full details on the debt
  • complete contact information for the collections company, and
  • an explanation of how you can challenge the debt.

Once you have all of that information, you can take your first step: verifying the debt. Because there’s a very good possibility that it’s just plain wrong.

It Might NOT Be Your Debt

Collectors often have incorrect information, usually about the amount due. Collectors also may lie to you – this space is filled with scammers.  

Your move: Demand proof of the debt they’re trying to collect. Once you’ve asked them to verify the debt, they have to leave you alone until they provide the information you requested. If they don’t send you proof of the debt, you can demand that they stop contacting you with a cease and desist letter.

Once you get the letter, make sure it is legitimately your debt and the correct amount.

If the debt really is yours, find your records from the original creditor, whoever you owed the money to in the first place. Track down proof of any payments you made on the original debt. You can use this information to help negotiate a settlement or payment plan if you can’t pay the debt in full right away.

If the debt isn’t yours or isn’t 100% correct, dispute it. If you challenge the claim within 30 days of the collector’s first contact, they must stop asking for payment until the dispute has been settled. But if you file the challenge after that 30 days is up, they can keep calling you during the investigation period.

Learn more about managing debt and collections in my book Debt 101.

Record and Document Everything

Every single time you communicate with the debt collector, keep a complete record.

Keep copies of everything you send to them, and only send written communications through certified mail or email so you have proof they received it.

When you speak with them, either record the call (with their knowledge) or take detailed notes during the conversation. Document the date and time of the call, the collector’s name, and everything you discuss.

Be very careful what you say to them. They will use anything you say to help them collect. Don’t talk with them about your paycheck, your budget, or other bills you have to pay. Keep the conversation focused on the specific debt they’re collecting, but do not accept responsibility for the debt until you have verified that it’s real and correct.

You Have Rights

A special law, the Fair Debt Collection Practices Act (FDCPA), protects you from predatory and overzealous collectors. The FDCPA limits when collectors can contact you, how they can speak to you, and who else they can contact. You can use this law to stand up to collectors that are giving you a hard time.

8 Things Collectors Can’t Do… a.k.a. Stop F*#king Calling Me!

Debt collectors may try to intimidate you, but there are legal limits on what they’re actually allowed to do. Among other things, debt collectors are not allowed to:

  1. Threaten you with violence or arrest
  2. Lie to you about who they are or what you owe
  3. Harass or bully you
  4. Curse at you
  5. Call you before 8:00 a.m. or after 9:00 p.m.
  6. Call you at work if you tell them your employer doesn’t allow this type of call
  7. Call you at a specific time if you’ve told them that time is inconvenient
  8. Call you at all if you ask them in writing to stop calling

If a collector does any of those things, file a complaint immediately with the FTC.

What About Contacting Other People in Your Life?

Collectors can and do contact other people in your life… but they’re only allowed to contact them once and for specific reasons. If they can’t find you, they are allowed to contact your friends, family, and employers to try and get your contact information.

They’re also allowed to call your employer to verify employment.

BUT if they get in touch with someone who isn’t you, they aren’t allowed to reveal that they’re debt collectors. And they can’t tell anyone why they’re trying to contact you.

Time’s Up: The Statute of Limitations

Collectors pursue debts so aggressively because all collections come with a hard deadline called the statute of limitations. And it’s virtually impossible for a collector to win a judgment against you in court once the deadline passes.

So, collectors are up against a ticking clock that starts with the last activity on the debt in question. The clock stops based on a combination of your state law and type of debt.

But if you make any payment of any size OR if you admit to owing the debt, you might restart the clock and extend the statute of limitations.

Before you engage with the collector in any way, make sure you know where your debt falls in this time cycle. That can give you a serious leg up in negotiations.

Learn more about managing debt and collections in my book Debt 101.

How to Negotiate with the Debt Collector

Once you’ve verified that a debt is yours, your next step is figuring out how to pay it. Look at your budget to see how much you can afford to put toward this debt. If you can’t pay the full amount all at once, you may be able to split it up into three or four payments – but that’s the usual limit.

When you know how much you can pay and whether you’ll do it in a lump sum or a few payments, make an offer to the collector. Start with a number that’s a little lower than you can afford. For example, if you can afford to pay $3,500 against a $5,000 debt, consider offering to pay $3,000. The collector will probably make a counteroffer that’s higher than yours, possibly for the full debt. Stick with your plan, and don’t agree to more than you can afford to pay.

Once you and the collector have come to an agreement:

  • Get it in writing before making any payments
  • Make sure the written agreement clearly states that the full debt will be settled when the agreed-upon amount is paid in full
  • Be aware that the statute of limitations restarts as soon as you make a payment
  • Pay your debt in the way that you’ve agreed to

Be aware that if you pay less than the full debt, you may have some tax consequences. If the collector cancels more than $600 of debt, they will report that to the IRS. You’ll get a special Form 1099-C at tax time and will have to report the canceled debt as income and pay tax on it. Still, the tax will be a lot less than then canceled portion of the debt… so you still come out ahead on the deal.

Learn more about managing debt and collections in my book Debt 101.