If you have never been sent out for debt collection – let’s just say it is an experience you will always remember. The unpleasant experience is not just financial, but an emotional rollercoaster which makes it difficult for you to stay calm and act rationally. It is imperative however that you do so and to remember that you are protected by consumer protection laws.
Around 30 million Americans struggle to pay their debt each year, according to the statistics of the Federal Trade Commission. Agencies harbor a reputation for even pushing the law sometimes, and that is why it is important that you keep calm and think rationally through it all. You must understand that their aim is to pressure you into paying money.
According to the Consumer Finance Protection Bureau, the biggest growing complaint category are the collection agencies. The truth is that all these complaints are valid. This is because there is no official registrar for debt, and most of the time the only evidence a collection agency may have that you owe is just a name on a spreadsheet. All of this makes it very easy for agencies to commit fraud or just be acting out of a consequence of human error.
When your debt is sent to collections there are plenty of things that you can do to protect yourself. When armed with information you are able to turn the tables.
Being in Debt vs. Debt Collection
It is important that you remember that there is a difference between being in debt collections and being late on your payments. There are different types of debt collectors. They can be lawyers, companies or simply individuals. They first buy debt from creditors and then get you to pay off the debt. Which means a third party is now involved in a debt you owe to someone else. This makes it difficult to track the trail especially with the lack of regulation surrounding collections.
There a few things that a collector may try to make you pay.
How Collectors Make You Pay
The first thing that they do is send you a formal letter. If it is a bank or a credit card company they will make the call during the first three months. After this time the bank writes off its debt. After a couple of months, most major banks will sell these debts to another collection agency. Once they have done this, they have officially ended their relationship with the borrower.
When it comes to the letter the important thing to note is that it should have details about your rights and should state their intention to collect debt which would prevent legal action.
There will be plenty of reminders and calls from the debt collector’s end. Some people work out a negotiation with the help of their unified lawyers, others work out a settlement before things take a turn toward legal action.
The most relevant thing that people may not know is that the debt collector is in every right to sue you and many have done so. If you don’t show up to court you lose by default and become legally responsible to pay off your debt. The other unfortunate thing about going to court is that you may also be liable to pay an additional fee that the collection agency has had to spend on lawyer’s fee and interest.
Why Your Credit Score Suffers
The problem with your credit score is that when you have debt collection your scores drop and if your score was really high then it will drop just as proportionately.
An interesting feature here is the Pay-for-Delete deal where you can get a collection agency to remove your debt. This way you agree with the agency to pay the amount at which point they get rid of the item from your account. A lot of collection agencies will offer this during your negotiations.
When a lender seeks a third party for collections the FDCPA is set in motion to protect the consumer. The most important one out of these is a consumer’s right to request debt validation. It is important that you invoke this as soon as the collector gets in touch with you. Also, it is important to remember that a collector must send you a letter and not just a phone call.
If you are looking for validation of a debt and whether it has been transferred to a third-party agency, you can always ask for confirmation of the debt. You can do this by drafting a certified letter. There are other rights that you have as a borrower.
For instance, a collector cannot call or contact you before 8 am or after 9 pm unless you have specifically communicated for them to do so. You have every right to send a cease and desist to your collector for calling at your place of employment. Collectors cannot threaten to publish your name, neither can they can impersonate an officer of the law. If they do so you have every right to sue them for at least a $1000. However, if violations rise to a standard of harassment you can sue for even more.
You can also complain if you believe the debt collection is not meant for you. If you have solid documentation then your case is good.
You can also file a dispute with the credit bureau, at which point the collection agency will be asked to provide proof if they keep this from the bureau then after a month the information will disappear from the credit bureau.
In the end, it is possible that you consider declaring bankruptcy. If you are able to show that you cannot possibly pay off the debt the court will let you declare it but it does have its long term effects on your financial life and therefore must only be used as a last resort.
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