If you've ever found yourself in debt, you know there's one surefire way to ruin your day - getting a call from a debt collector.
Even if you’re able to pay off the debt immediately, working with a debt collector can cause unwanted stress and headache that’s easier to avoid than deal with head-on, especially if you aren’t sure about the debt you’re presented with or how the process works.
Things can get a little more dire, of course, if you’re unable to pay the debt, but it’s good to know: You have rights.
Arming yourself with the right knowledge of how to deal with outstanding debt and debt collectors can be a powerful resource for anyone who has dealt with a situation like this before.
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If you've received a debt collection call, here's what you should know.
1. You have rights
As mentioned before, it’s important to know your rights when a debt collector calls you. Sure, they have every right to collect on legitimate debt you owe, but like most industries, there are rules and restrictions on how they can conduct their business.
2. Old debts do expire
The clock is ticking on how long collectors have to sue you over a debt. Each state sets their own laws, but most time limits are four to six years after the last payment was made on the account. It’s worth reviewing your state’s law because…
3. Zombie debts are real
Even after the statute of limitations (SOL) runs out, collection agencies may still try to get you to pay a debt that is no longer owed – especially since accounts with debt owed get resold all the time. This is tricky because...
4. Making a payment could mistakenly restart the clock
If you get a call about a debt, be sure to get as much information as possible before saying you owe it. If the old account is legit, admitting that you owe money or making a partial payment, even just over the phone, could restart the clock on the SOL. This is really important to know because…
5. There are a lot of scammers out there
This isn’t breaking news, but we all know there are scammers out there. And, while you don’t necessarily need to assume the person on the line is a criminal, it’s good to stay on guard. The Consumer Financial Protection Bureau suggests you, “Ask the caller for their name, company, street address, telephone number and if your state license debt collectors, a professional license number.”
6. You’re entitled to get it in writing
Debt collectors are required to send a statement outlining the specifics of debt owed within 5 days of contacting you. The notice must include the amount of money you owe, the name of the original creditor, and what actions to take if you believe the information is inaccurate. This should be treated as step one in determining whether the debt is legitimate or not.
7. You can dispute the debt
Want to question the debt you’re being presented with on a collection call? File a dispute in writing within 30 days of being contacted for the first time. Debt collectors have to investigate and cease contacting you until they verify your debt owed in writing.
8. Collector’s can’t just “make up” what you owe
Debt collectors can charge interest of debt owed, but only up to the amount stipulated in your contract with the original creditor. Many states also cap the amount of interest and fees a debt collector can charge.
9. You can ask them to stop calling
Tired of receiving calls? The Fair Debt Collection Practices Act (FDCPA) requires collectors to stop contacting you if you send a letter requesting they do so. However – and this is important – it does not absolve you from being on the hook for any legitimate debts you may owe; it only stops the phone calls.
10. Calling too much is actually illegal
Also mandated by the FDCPA, debt collectors can only call between the hours of 8 a.m. to 9 p.m., and shouldn’t be calling you several times a day at home or at work. Abusive language, like cuss words or name-calling, also isn’t allowed.
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11. Debt collectors can contact your friends and family
But only to locate you. They can’t identify themselves as a debt collector, and there are limits on how many times they can contact a third party (someone who isn’t you).
12. You can’t inherit a debt
Contrary to some sources out there, you can’t inherit a loved one’s debt after they die unless you cosigned on the loan in question. Debts owed by the deceased are generally paid out of their estate, not by friends or family, so don’t panic if you’re an executor.
13. Ignore a debt and you could face big consequences
Simply ignoring debt collectors seems tempting, especially if they’re stepping out of line, but it won’t make that debt go away. Plus, they could…
14. Collectors can report and have the debt put on your credit report
It may not seem fair, but debt collectors can report outstanding accounts to the consumer credit bureaus, which in turn, could then show up on your credit report.
15. ...But only if they report accurately
You can dispute a debt collection account if it’s wrong or if there’s an error (such as inaccurate balance or payment status) with the credit bureaus.
16. If your debt is resold, it doesn’t restart the reporting clock
Debt account can change hands several times, but it’s good to know that the sale does not restart the 7-year credit reporting window. If the new collector re-ages the account, you can dispute the date with the credit bureaus. Also, if the same account is being reported by more than one agency, that’s in violation of the Fair Credit Reporting Act (FCRA).
17. You’ll soon get extra time to settle medical debts
Soon, credit bureaus will have to wait 180 days from the time medical debt is first reported before adding it to your credit file, thanks to a settlement brokered by state attorney generals back in 2015.
18. Not all collectors report right away
Some collector’s hold off on notifying credit bureaus so they can use credit reporting as leverage to get you to pay. This practice is important to note because…
19. You can owe a debt that’s not on your credit report
While checking your credit report is a good habit, it doesn’t always take into account a debt that may not yet be listed on your report – the collector just may not have reported it yet.
20. Many collectors are willing to negotiate
Collectors buy debt to turn a profit, and often, are able to buy debts for pennies on the dollar. This means they don’t need to recoup the full amount to turn a profit, which is good in a way, since it means they’ll likely work with you to settle for less.
21. Get it in writing (this is important)
If you’re able to negotiate successfully: First, congratulations! Second, get it in writing. Having the new terms in writing, especially is they involve skipping further adverse action against you, is important.
22. If a collection account hits your report, it will hurt your credit score
A single collection account could cause your credit score to drop 50 to 75 points or more. In this case, the better your score, the harder the fall, and...
23. The sting can last a long time
Collection accounts, paid or unpaid, can be reported to the credit bureaus for seven years, plus 180 days from the date the original account went delinquent, though its effect on your score will lessen over time.
24. Yes, even if you pay…
Unfortunately, paying a collection account won’t guarantee its removal from your credit report. In fact, thanks to contracts set with the credit bureaus, many collection agencies continue reporting the account for the full 7-year timeframe, although there are signs that practice could be changing.
25. There are (good) reasons to settle
If you’re stuck with the account on your credit report, make sure it’s at least correctly reported as being paid. Paid collections carry less weight than unpaid ones, and some newer credit scoring models ignore them completely.
26. Debt itself won’t land you in jail
You can’t be arrested just because you owe someone money, so if a debt collector threatens jail time, their behavior is out of line.
27. Being threatened is illegal
The FDCPA prohibits threats of being arrested, violence, or even lawsuits if the collector has no intention of filing one, although…
28. You can be sued
So long as the SOL in your state hasn’t expired on debt you legitimately owe, a collector does have the right to sue you for the amount of debt owed.
29. Small payments on your debt won’t spare you
Another reason why it’s important to get a signed agreement in writing – debt collectors can still sue you, even if you’ve made small payments towards paying the debt owed. A signed agreement could hold up in court, however, it’s never wise to ignore a court summons in the event that you receive one. Which is why…
30. Skipping or ignoring a court date could cost you
Failing to appear in court could result in a warrant for your arrest, which is often why there’s confusion around whether or not unpaid debt can land you in jail. It’s not the unpaid debt, it’s more likely your absence from court that gives the collector the winning judgement by default, which can also lead to garnishment.
Catch the full list at USA Today for the other 20 things you should know, including:
- Why a judgment isn’t always final (and how to find loopholes)
- How to get rid of illegal robocalls (and the one exception to the rule)
- How to get a lawyer to take on your case for free
Avoiding Debt Collectors Altogether
If you happen to fall behind on payments, contacting your creditor immediately to discuss working out a payment plan could help you avoid the debt being sent to collections altogether. Also, good to note, sometimes medical debts (and other bills) go to collections simply because you don’t know you owe. If you suspect this may be the case for you, use a free service to pull your credit report and read it over thoroughly.
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