So you just got one of those unlabeled envelopes in the mail.
You open it up to see its from a Collection Agency (also called the CA for collection agency) who is representing a lender or a business (also called
the OC for original creditor) and they want your money - most usually NOW
So… what are you to do?
First and foremost – you need to assess rather or not this debt belongs to YOU
No! This debt does not belong to me!!
Immediately and without hesitation, you need to send what is called a “debt validation” letter. A very
good example of this kind of
letter can be found Here
send this letter through the USPS vis registered mail
with a signature required delivery.
Yes – It belongs to me.
Okay then. No sweat! Either its something you’ve forgotten about…perhaps a late fee from Blockbuster (I personally have been sent to a CA for a
$7.00 late fee from Block Buster video that I forgot all about).
Or you’ve hit hard times. Perhaps a divorce, a medical problem, or you got laid off of your job. It all happens – to millions of hard working,
good and honest people- just like you.
Most delinquent debts (bad credit) do not happen simply because people don’t want to pay. True – some people choose that route, and that gives
everyone else a bad name, but you, personally, aren’t that way. There is no reason to live with any guilt.
The first steps of your new road to recovery, before you EVER
pick up that phone, is to educate yourself on your options, and your rights.
Never, and I repeat NEVER
pick up the phone and talk to a collection agency without first educating yourself to your rights and your options.
----- The FDCPA -----
The Fair Debt Collection Practices Act
is a compilation of federally regulated
and federally enforced laws that are set in place to protect you – the consumer – from shady practices by business owners and collection agencies
The existence of the FDCPA does not suggest that ALL
collection agencies are bad. This is not true at all. But that does not mean you
should not plan for the worst, and hope for the best when dealing with any collection agency.
The first thing you should look for when you open that envelope is rather or not this correspondence contains what is called the Mini-Miranda Warning,
and usually appears as follows:
This is an attempt to collect a debt. Any information will be used for that purpose. You may choose to dispute the validity of this debt, in
writing, within 30 days of receiving this notice
And exists in order to comply with the following from the FDCPA:
FDCPA Section 809. Validation of debts [15 USC 1692g]
(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection
(a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt
collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy
of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original
creditor, is mailed to the consumer by the debt collector.
In additional posts in this forum – I will cover the FDCPA and its application to you in much more depth.
But for now – if your notice from a Collection Agency does not have a mini-Miranda notice on it – you need to save this letter (in a fireproof box
or something) and immediately contact a lawyer who specializes in the FDCPA – a simple google search will give you plenty of results. You may have
grounds to file a lawsuit against the collection agency.
-----The Collection Agency ----
Within five days of their first contact with you, the collection agency must send you a written notice which outlines:
- The total amount of money that you allegedly owe
- The name of the original creditor
- That unless you, within thirty days after receipt of the notice, dispute the validity of the debt or any portion thereof, the debt will be assumed
valid by the debt collector;
- That if you dispute the debt in full or in part within that thirty day period, the debt collector will obtain verification of the debt and mail it
to the consumer; and
- That upon your written request within the thirty day period, the debt collector will provide you with the name and address of the original
creditor, if different from the current creditor.
One of the hardest things to do when repairing your credit is picking up that phone. One thing to keep in mind is that – now – your debt belongs
to the Collection Agency (in most cases). A lot of Collection Agencies are also called “bad debt buyers” wherein they will purchase the debt from
the OC (original creditor) for a very small fraction of the actual cost. What they are doing is buying the rights to collect the full amount from
This is in the best interests of the Original Creditor, because the creditor can then write off your debt, and basically forget about you. Here we
see one of our first “conspiracies” in the Lending industry – but we’ll discuss that in future threads
You can easily find out if your debt has been purchased by the collection agency by calling the original creditor. The OC will be able to tell you
who owns your debt. If it is the OC (original creditor) then my personal
suggestion is that you do your dealings with the OC.
If the debt belongs to the Collection Agency, however; you must do all future correspondence with the Collection Agency – the original creditor has
written you off, and they have no way of rectifying this account any longer, you are stuck with the CA.
If it does get to this point – don’t panic. Its in the best interests of the CA (collection agency) to work with
you within the confines
of your financial situations. Don’t, however, expect them to take your word for it… this will be a tough road if your debt is a large sum. But
it is something that you can accomplish.
----Picking up the Phone -----
Keep a pin and paper nearby – and write down names, dates, times, and foot notes of the conversation. You never know when it’ll come in handy –
please learn from my mistakes…
But….Its simple. Call them. Don’t be afraid – keep in mind that you are talking to another tax-paying citizen on the other end of the phone.
Don’t expect the worst, but do plan for it.
Your collection agent is typically going to first verify your information to make sure that you are who you say you are.
You are now going to get the mad-libs style inquisition of “why did you let it get this bad”
You are left with two options. Pay in full, or try to negotiate. Collection Agency employees are paid on Commission – so don’t expect it to be
easy to negotiate in the event that your debt is relatively high. But it is still doable.
Never disclose where you work – OR – where you bank.
send a personal check to them in the mail or give banking/credit card information over the phone. Never !!!
It’s best to send a cashier’s check or a money order. Make sure you keep the copy of the cashier’s check/money order in a safe place where you
won’t lose it.
Do it this way rather you are able to pay in full, or if you reach a payment agreement.
If you are able to reach a payment arrangement with the collection agent on the phone – never send them a dime until the agency its self sends you
agreement in writing. Politely demand that the new agreement be mailed to you in writing.
Never…never given in otherwise. Always send the payment via registered mail – using either a cashier’s check or a money order.
Never enter a payment agreement that you are unsure of your ability to keep. If you fail to live up to the new agreement – the chances that
you’ll find your butt in court are going to be very high.
Whichever route you take – make sure you keep track of your steps. The CA is keeping track of them – and you need to be responsible for yourself,
in the event that you wind up in court and they are able to cherry pick your actions and use them against you…you will be able to defend yourself to
In the event that you are unable to come to a payment arrangement, and you are also unable to pay in full – I suggest sending them something as a
gesture of good faith. A symbolic payment which says “I want to pay, but I just can’t do it all at once”
Send this payment at the same time – every month, and never miss it.
Don’t allow your fear to force you to send $500 in the first month, and only be able to pay $20.00 next month, because they will frown upon it.
They want to see consistency to ensure them that you are serious about settling this debt. Keep your head cool, and you’ll be fine.
Of course – the easiest way to deal with collection agencies is to never do anything to have them calling you in the first place. But life happens.
Don’t let it get you down – there are bright lights at the end of these tunnels.
I hope to be contributing much more to these forums in this light, and hope to have more feedback from you – the readers.
A few closing thoughts:
Never sign a commitment that you can’t oblige.
Always pay your bills on time. If you run into hard times – call your original creditor before it ever gets close to going to a collection agency.
work with you.
No matter how far in over your head you are – there are ways out. You have to have a strong stomach and an iron clad determination most of the time
– but there are people out there to help you.