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How to Deal with Debt Collectors and Agencies

It’s easy to get behind on paying the monthly bills. The economy may have reduced your ability to make money, your investments may have dwindled, or perhaps you had a home repair or medical emergency that ate your savings.

It only takes a few missed payments before debt collectors start to call, demanding money.

When creditors do not receive payment for a period of months, they often find another company or an affiliate company to collect the past-due amount. Sometimes a collector will agree to collect the debt in exchange for a fee or for a percentage of the money collected as payment. Other times a third party will purchase your debt from the creditor for less than you owe and then attempt to collect the full amount.

Although some collectors are cordial, others resort to harassing phone calls, threats and obscene language to force you to pay immediately.  This can make a worrisome time even more stressful, which is why it’s important to know your rights as a consumer. You should be familiar with the debt collection process, as well as how collectors can garnish wages and how you can fight back.

Debt Collection Process

First and foremost, you will have to answer directly to your creditor. For about half a year after your bill becomes overdue, a collector within the lending company will contact you regarding the debt. If you do not take care of the debt during this period, your creditor will likely sell the debt to a third-party debt collector. If this happens, you’ll owe the collection agency directly rather than owing your original creditor.

Owing a debt collector tends to complicate the issue; more laws come into play, and debt collectors tend to be more aggressive in their collection practices. When possible, it’s advised that you attempt to settle your debts before they are handed off to collection agencies.

Debt Collection Arbitration

As soon as a collection agency begins contacting you about a debt, verify the debt before you take any other actions. If you believe the debt is for a different amount, or if you believe you do not owe the debt at all, the process of debt collection arbitration can help you clear the air.

Within five days of your first contact from a collection agency, the collector must send you a written notice. That notice should list the amount owed and the name of the creditor to whom money is owed. If the information is incorrect, notify the agency immediately and do not pay any amount you don’t owe.

If debt collectors still refuse to stop calling you, you may need to begin debt collection arbitration. This is a means of fairly settling debt disputes by using a third-party arbitrator.

Collect as much evidence as you can to show that you do not owe the debt in question. This may include items like receipts, contracts and account summaries. The arbitrator will listen to your case and to the collection agency’s case, reviewing all documentation regarding the loan in question.

After hearing both sides, the arbitrator will decide on a course of action. If he or she deems that you owe the debt, the debt collector or creditor will bring the decision to a court for confirmation. The court will order you to pay the debt and may issue a garnishment order against you.

Garnishment Process

If your account is severely past due and you haven’t made any payments, your creditor or debt collector may request that a judge issue a garnishment order against you. With this, the company can garnish, or collect, owed money directly from any income such as wages, bonuses or pensions. This means a share of your earnings will go toward repaying your debt until the full amount is satisfied.

Creditors can only garnish a certain amount of your earned income, ensuring that you are left with enough of your paycheck to cover basic living expenses. There are also certain types of income, such as child support, that are immune to garnishment.

Consumer Rights

Collection agencies tend to be aggressive during every step of the collection process. Some commonly employed collection tactics such as harassment are illegal. Therefore, it’s vital to review your rights, which may vary by state, so you are able to recognize and report when a collection agent is breaking the law.

Fair Debt Collection Practices Act

The nation’s consumer protection agency, the Federal Trade Commission, enforces the Fair Debt Collection Practices Act, which bars debt collectors from using abusive, unfair or deceptive practices. The act covers personal, family and household debts, including money owed for car loans, medical bills, credit cards and mortgages.

Here are some actions prohibited by law:
  • Harassment
  • False statements
  • Unfair action
  • Threats

You also have a right to privacy, so when you receive the first phone call, tell the collection agency you want all future contact in writing. Follow up your request in writing and say you want to be the only person contacted concerning the debt, as some collectors will attempt to contact employers, friends, neighbors and family members.

Be sure to make a copy of the letter and send it by certified mail. Pay for a “return receipt” so you have documentation that the collector received it.

Stop Collection Agency Harassment

If a debt collector harasses you and does not stop illegal actions upon written request, you have the right to fight back. You can file a lawsuit in state court or federal court within a year after when the law was broken. If you can prove the violation and win, the judge can make the collector pay you for damages you suffered, as well as your attorney fees and court costs.  It’s important to remember the debt will not go away without payment, even if the debt collector violated federal law.

Members of the military should contact their local Judge Advocate General’s office if they are contacted by a collector. Another federal law, the Service Members Civil Relief Act, provides protections for those who are in the military whose financial life is affected by service.

Since many states have their own debt collection laws, it’s important to contact your state Attorney General’s office to help you determine the rights you have.  You also can report any issues with a debt collector to the Federal Trade Commission.


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Al Krulick

Al is an award-winning journalist with dozens of years of writing experience. He served as a drama critic, high school teacher, arts administrator, theatrical producer and director. He also dabbled in politics, running twice for a seat on the U.S. House of Representatives for Florida. Al is a Certified Debt Specialist with the International Association of Professional Debt Arbitrators and specializes in real estate, credit and bankruptcy advice.

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