Debt Collection and Collection Agencies
If you carry any amount of debt on credit cards or loans, you are, by law, considered a “debtor”. As a debtor, you have at some point signed a contract stating that you agree to pay a specific debt by a specific time period. For many overextended consumers, it is easy to fall behind on payments, especially if you carry a lot of debt. When your payments lag behind by a certain number of days (or dollars) your account may be sent to collections.
Many large banks and creditors have their own collection departments that will contact you when you fall behind on payments. Usually, the calls progress from a “friendly reminder” to more aggressive tones when the creditor no longer believes that you are going to pay your debt. If the debt is still unpaid, your account will often be closed by the collections department, and sent or sold to another company, usually a collection agency.
What does a collection agency do?
Debt collection agencies are hired to do one thing – collect debt. Often, they receive a commission or purchase your account at a lesser value than you owe. Sometimes attorneys will act as collection agents. Collection agencies are often hired to seek out debtors and track them down to speak with them about their debts. The first step in debt collection is to send letters, but many agencies will go about collecting debt by phoning you at home, work, or your relative’s home, if you have supplied your creditors with that information.
There are laws about what debt collection agencies can and cannot do. They vary by jurisdiction, but commonly, it is illegal for them to continue contacting you after you request they stop. They are not allowed to speak to anybody else about your debt unless their name is on the account. They can’t threaten you with court or other damages unless they fully intend to seek damages and are ready to file paperwork on the creditor’s behalf.
How can I work with a debt collection agency?
Debt collectors are adept at negotiations. While they may not always lend a sympathetic ear, if you are sincere about making a payment plan, they are usually willing to work with you. (After all, they DO want their money.) Ask if you can make small monthly payments or if they can cut out some of the late fees added to your debt. Make sure you get information in writing and sign an agreement stating the terms of your repayment. It is even sometimes possible to negotiate better credit reporting terms with a collection agency, but you need to ask them.
When speaking with a debt collector over the phone make sure to take notes - including the time and date of the call and the name of the caller. Ask for them to mail you a bill or statement. When you begin making payments to a collection agency, keep copies of your cancelled checks or money orders as well as the original bill. When your debt is satisfied, ask that they report it to the credit bureaus and send you a letter stating that you no longer owe money.