How To Deal With Collection Agencies

Monday, November 12, 2012, 2:00 AM | Leave Comment

Many people go through tough financial times due to unemployment, health problems or unexpected financial emergencies.

Unpaid debts often get turned over to collection agencies that do their best to collect.

Here are a few tips on how to deal with a collection agency.

  • Validate the debt

    The Federal Trade Commission’s Fair Debt Collection Practices Act gives individuals the right to ask for validation of any debt an agency is trying to collect. Mail the agency a letter as soon as you receive a notice requesting you pay off a debt.

    In the letter, politely tell the agency that you wish to dispute the debt. Ask the agency to explain the exact nature of the debt, how the debt was calculated and the name and address of the original creditor. Request copies of any documents or contracts showing you agreed to pay this debt.

    If you don`t hear from the agency within one month, write a second letter and include a copy of the first. Explain that this is the agency`s second and last chance to provide written proof that you owe this debt. The company must either supply you with the requested information or cease all collection attempts.

    Send the second letter as a registered letter through the USPS for proof that you mailed the company. If the agency still hasn’t validated the debt within the following 30 days, you can forget all about the debt and collection attempt.

  • A Validated Debt

    If the agency sends you adequate proof of the debt, check the statute of limitations in your state to find out if you`re still responsible for it. If not, send the agency written notice explaining that you are not responsible for the debt. Demand that the company stop harassing you or face legal action.

    If the collector has written proof that you owe the debt and it`s still within your state`s statute of limitations, the agency has the legal right to try to collect on that debt. In that case, you might try to work out a repayment plan that allows you to pay off the debt in affordable monthly payments.

    You could also try to settle the amount of the debt. Collection agencies often settle for 50 cents on the dollar and you can often negotiate them down even more.

    Be sure that you get any repayment or settling agreements in writing. Ask the agency to send you a copy that details the payment terms and agreements. Also request that the agency reports the debt as being paid in full, even if you take advantage of a reduced payoff option.

  • Know Your Rights

    All collection agencies must follow certain laws and debtors have specific rights. According to the Better Business Bureau, a collection agency cannot threaten you with physical violence, pressing criminal charges or property repossession.

    Collectors cannot lie to you about the credit information and are not allowed to use any obscene language. A credit agency cannot contact you before 8 a.m. and after 9 p.m. They also cannot call you at work if you tell them not to do so.

If all else fails, you can turn to the debt professionals to help ease the burden. Debt management companies negotiate on your behalf to reduce the balances you owe to creditors. Debt professionals can also consolidate your debt so that you only have to make one small monthly payment to creditors instead of several larger payments.

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