Debt collectors are a necessary evil in the U.S. credit system, but in some cases, their tactics can be predatory or even illegal. If you’ve been contacted by a debt collector for a past-due balance, going into the process blindly can give the collection agency the upper hand.
Instead, educate yourself about your rights and how to work with debt collectors without allowing them to take advantage of you.
Why People Are Contacted By Debt Collectors
There are two situations where you may end up speaking with a debt collector. One is when a creditor uses its in-house debt collectors or hires a debt collection agency or a lawyer to collect a past-due debt on its behalf.
The second is when a debt collection agency buys a past-due debt from a creditor at a discount, with the hopes of collecting the full amount from you.
“Usually the first thing that’s going to happen is that the creditor itself is going to contact you to try to get payment,” says Robert Foehl, executive-in-residence for business law and ethics at Ohio University. “But if too much time has passed, that’s usually when they will turn to the services of a third-party debt collector.”
With medical bills, however, Foehl says that health care providers aren’t as well-equipped to act as a creditor. So you may be working with a third-party collector from the beginning.
Tips for Dealing With Debt Collectors
Regardless of how you came in contact with a debt collector, the more you know about the process, the less painful it will be. Follow these tips to avoid making things worse with debt collectors:
- Don’t ignore them.
- Know your rights.
- Watch out for old debts.
- Get everything in writing.
- Avoid giving too much information.
- Watch out for scams.
- Try to negotiate.
- Consider other ways to pay.
Don’t ignore them. The debt collection process can be painful, but it only gets worse if you act like it isn’t happening. Ignoring phone calls and hanging up on collectors won’t make them go away. Let the debt sit unpaid long enough, and the debt collector may sue you for the balance.
Know your rights. The Fair Debt Collection Practices Act dictates what debt collectors can and can’t do when working with consumers.
“Your creditors have the right to be paid and can take steps to collect from you,” says Cara O’Neill, bankruptcy attorney and legal editor and writer at Nolo, a website that helps consumers and small business owners navigate the law. “However, federal law prohibits a debt collector from engaging in abusive, unfair or deceptive practices. Your state law might have similar protections, too.”
While legitimate debt collectors typically comply with federal and state laws, plenty of scammers and shady collectors are less inclined to follow the rules. Debt collectors aren’t allowed to:
- Call you before 8 a.m. or after 9 p.m. in your time zone.
- Contact you at work if you’ve told them verbally or in writing that your employer doesn’t allow such calls.
- Contact a third party for any reason other than to get your contact information.
- Harass you or anyone else they contact about you.
- Lie about what you owe.
They also can’t use deceptive methods to collect, including:
- Posing as law enforcement.
- Claiming that you’ll be arrested if you don’t pay.
- Threatening to seize your property or garnish your wages without the legal right and intention to do so.
- Giving false credit information about you to anyone else.
- Using a fake company name.
Note that you can also request in writing for the debt collector to stop contacting you and that company will have to honor the request. That said, stopping the calls won’t stop your liability, so they can still report the collection account to credit bureaus or sue you for the debt.
If a debt collector violates any of your federal or state rights, O’Neill recommends finding a consumer protection lawyer who can file a lawsuit on your behalf. “If you can’t find someone to take your case and you don’t want to fight the violation yourself, another option is to seek help from a government agency” like the Consumer Financial Protection Bureau, she says. In addition to filing a complaint with the CFPB, you can contact your state’s attorney general.
Watch out for old debts. States typically have a statute of limitations on certain types of debt, after which they’re no longer collectible. These balances are often called zombie debt. That won’t stop some debt collectors from trying to get you to pay, though.
If you acknowledge the debt is yours or make a partial payment, it could reset the statute of limitations and you’d be on the hook for it. So make sure you know the law for your state and ask for verification of the debt instead of acknowledging it.
Get everything in writing. When debt collectors first contact you, they’re required to give you certain information about the debt, including the name of the creditor and how much you owe. They’re also supposed to inform you that you can dispute the debt and that you can request the name and address of the original creditor, if applicable.
If you don’t get this information in the first call, they’re required to send it to you in writing within five days. Even if they do provide it upfront, still ask for written verification of the debt.
O’Neill also recommends asking collectors to put any promises they make to you on paper. If, for instance, a collector agrees only verbally to settle your debt for less, you may not have any legal recourse if he or she tries to collect the remainder after you’ve paid the agreed-upon amount.
If you make any requests, put them in writing and keep a copy for yourself in case you need them later on. Also, consider recording phone conversations to be safe.
Avoid giving too much information. Any information you give to a debt collector can be used to help collect the debt, says Foehl. For example, don’t pay with a check or give out your bank account information, especially if you think the collector may not be legitimate. Instead, use a money order or a third-party payment service. Even providing bank statements without an account number can tell the collector how much money you have.
Watch out for scams. Legitimate debt collectors try to comply with federal and state laws, says Foehl. But scammers have no intention of following the rules.
“We all hear about the horror stories of so-called debt collectors doing terrible things and abusing people,” he says. “But those aren’t legitimate debt collectors.”
To spot scammers, Foehl recommends getting their address and phone number and looking them up online. A legitimate debt collector will have a verifiable online presence. So if the collector is reluctant to provide that information, you may be dealing with a scammer.
Also, watch out for collectors that blatantly disregard your rights and ask for bank account or credit card information for immediate payment. They may just be looking for an opportunity to drain your account or rack up more debt on your card.
Try to negotiate. If you don’t pay your debts, you open yourself up to damaged credit and a lawsuit. That doesn’t mean you should agree to pay the balance in full, though – at least, not at first.
Instead, offer to pay a fraction of what the collector is asking for as a lump sum. Start low because if you do settle, it will likely be for more than your initial offer.
How much you can settle for can depend on the situation. A medical debt collector with a recent bill, for instance, will likely be less lenient than a collection agency that bought the debt from your original creditor at a discount.
“Just keep in mind that you’ll get taxed on any forgiven amount over $600,” says O’Neill.
Another thing to keep in mind is a debt that’s marked settled may remain as a blemish on your credit report for up to seven years.
Consider other ways to pay. The sooner you deal with your debt, the sooner both you and the debt collector can move on. If you can’t afford to settle, here are a few alternatives:
- Work with a credit counselor. A credit counselor can get you on a debt management plan, which allows you to pay off your debt over time and possibly at a lower interest rate. If you go this route, be sure to work with a nonprofit credit counseling agency. You can find one through the National Foundation for Credit Counseling or the Financial Counseling Association of America.
- File for bankruptcy. Filing for bankruptcy immediately halts all collection attempts. Depending on the type of bankruptcy you choose, you can eliminate all of your debts by liquidating some of your assets and distributing the proceeds to your creditors, or get on a payment plan with affordable payments over the next three to five years.
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Avoid Debt Collectors If You Can
In an ideal world, you’d be able to stay on top of your monthly payments and avoid debt collectors in the first place. But if it’s already too late for that, knowing your rights and how to deal with debt collectors can make it easier to spot predatory practices and pay off what you owe quickly.
Once you’ve accomplished that goal, make every effort to avoid having to deal with debt collectors again. Not only will it be better for your credit and finances, but it will also help you sleep better at night.
10 Ways to Avoid Credit Card Fraud
Protect your identity from thieves with these precautions.
According to Javelin’s 2018 Identity Fraud Report, released by the advisory firm Javelin Strategy & Research, identity fraud victims increased by 8 percent in 2017. In total, 16.7 million American consumers had their identity compromised last year, according to the report. As for financial losses, credit card crooks hauled in a hefty $16.8 billion last year. If you’re wondering how you can avoid being a target of credit card thieves in 2018, try the following expert-approved strategies.
Corrected on May 29, 2018: A previous version of this story misspelled Svehla’s name.
Set up transaction alerts.
“I’ve been a victim of credit card fraud a couple times,” says Jim Barron, who runs AcceleratedFI.com, an educational site for people interested in part-time work that’s based in Battle Creek, Michigan. “The best solution I found was to set up alerts for any transaction over $1, so basically every time a purchase is made on any of my cards, I instantly get a text message notification,” he says. Most of the alerts are for his own purchases, but if any transactions come through that aren’t his, he can quickly get them reversed, he says. A variety of banks and credit card issuers provide consumers with fraudulent activity alerts, including Bank of America and Wells Fargo.
Cut up old cards.
According to Cal Cook, a consumer finance investigator with ConsumerSafety.org, a recall and safety-related news website, it’s important to follow this time-tested advice. “If a thief steals your intact card, they can use it for fraud,” Cook says. If you think the odds of your old discarded credit card getting stolen are minimal, think again. Dumpster diving, a decades-old trend in which people climb into dumpsters and look for treasure among trash, is still prevalent. And the last thing you need is a crook finding one of your old credit cards.
Minimize the number of credit cards you carry.
“The more cards you own, the more likely you are to be victimized by credit card fraud,” Cook says. “This is especially the case when considering the specific type of fraud called ‘cracking cards.’ Criminals buy active card numbers on the dark web [a part of the web only accessible by certain software, often used by criminals] and print them to a fake new card. The more cards you have, the more likely some of your information is on the dark web.” The caveat: If you get rid of a lot of credit cards, you could hurt your credit score. So, if you do get rid of cards, ensure you’re generally carrying less than 30 percent of your available credit to avoid damaging your credit score.
Don’t become a co-signer.
Some people feel it’s necessary to co-sign for a credit card, Cook acknowledges. For instance, you may want to co-sign a card for your son or daughter who isn’t yet 21 and can’t get a credit card of their own. But before you take this step, you need to trust your family member implicitly and recognize that co-signing can expose you to identity theft, he says. “Many cases of fraud involve family members. If you use a co-signer, that person has the same card information that you do, and they can make purchases and deny them to you. You want to be the only person with the card information if at all possible,” he says.
Guard your online purchases.
“You need to make sure you shop carefully. Protect your financial information by only using secured wireless networks and websites. Unsecured wireless networks and sites leave you vulnerable to breaches,” says Jill Schlesinger, a New York-based business journalist, certified financial planner and senior ambassador for the Certified Financial Planner Board of Standards Inc. She also adds that if you’re going to save your credit card information at a retail site, “make sure you are creating strong, unique passwords. Security experts recommend a minimum of 14 characters for creating a secure password.”
Be careful about which Wi-Fi hot spots you use.
It isn’t enough to make sure the websites you use are safe. You also have to make sure your internet connection is protected. “Avoid Wi-Fi hot spots,” advises McCall Robison, who blogs for BestCompany.com, a company review site. “Unfortunately, Wi-Fi hot spots are hackers’ common place to steal your credit card information. Wi-Fi hot spots normally don’t have efficient security measures in place, so hackers use this vulnerability to easily hack into your phone’s information – your credit card information specifically,” Robison says. She suggests that you stay cognizant of your Wi-Fi settings. “Oftentimes, devices are automatically programmed to connect to free Wi-Fi when available.”
Take precautions before providing your credit card information over the phone.
The main question to ask yourself when you’re talking to a customer service representative over the phone is why he or she would need this information. “Numbers can be spoofed to make you think you got the right phone number. Always call them – do not let them call you,” says Ed Bides, information security officer for Florida Capital Bank in Jacksonville, Florida. The bottom line, according to Bides: “Never give card numbers over the phone unless you have verified the business and phone number.”
Use a prepaid card for online transactions.
If you’re worried about credit card fraud, Bides suggests getting a prepaid card for your online shopping. “If you know you’ll spend $500 for an item, get a prepaid card for that amount and use that card number. This will protect you if someone steals your number online.” Granted, Bides says that if your prepaid number is stolen, a thief could get some of your money, but at least it wouldn’t be as much as it might be if you had a credit card. You can find prepaid cards at numerous retail outlets, including supermarkets and major drug stores.
Be wary of fraudsters when traveling abroad.
“You’re especially vulnerable to attacks when you’re traveling, primarily because you’re in a different environment with unfamiliar risks,” says Reg Harnish, CEO of GreyCastle Security, a cybersecurity services provider headquartered in New York. Harnish suggests that you take cautionary measures when you’re traveling abroad. “When traveling internationally, consider using a burner – disposable – phone when going to places like China and Russia,” he says. “Always disable Bluetooth, wireless and other connections, and do your best to remove sensitive data from your devices before leaving the U.S.”
Stay cognizant of what you put on social media.
(Jose Luis Pelaez Inc/Getty Images)
Keep in mind criminals may be looking for personal information on social media accounts. Be especially vigilant when it comes to “silly social media quizzes,” says Dona Svehla, senior vice president and chief lending officer of GTE Financial, a credit union in Tampa, Florida. “The information gathered is typically similar to that of traditional security questions such as what’s your favorite color, movie quote, first car you drove and so on,” she says. And those answers, of course, can be helpful for hackers who want to get into your credit card’s website and steal your information.