Dealing with Collection Agencies

What Are Collection Agencies?

Collection agencies are usually the last resort for financial organizations. If you fall behind on a regularly occurring bill, like a credit card payment, the lender will usually try to get you to pay off your account by sending you letters and calling you. If this fails, or continues for longer than the lender is comfortable with, they will often turn your account over to a collection agency.

The collection agency will either work on behalf of the lender by trying to get the money that is owed to them, or the agency will purchase the debt and try to collect it for themselves. For example, if a credit card company is unable to collect on a $10,000 debt, they may be willing to sell it to a collection agency for $3,000. The credit card company comes out ahead because they at least got some money and the collection agency then tries to get the person who owes to pay the full $10,000, earning them a nice profit.

What Do Collection Agencies Do?

Collection agencies employ a lot of scare tactics to get you to pay up. Unfortunately, knowing this doesn’t really make it any easier to deal with collection agencies. Most of the time, they start out by sending you letters that threaten further action if you don’t pay your debt. This will be followed by more letters.

When they realize they aren’t making any progress with their letters, the collection agency will start calling you on the phone. Again, they imply that something bad will happen if you don’t pay.

Dealing with Credit Card Debt Collection Agencies

Collection agencies don’t have a lot of power to force you to cough up your cash. They can’t take away any of your possessions or make deductions from your paycheck. But they can report your lack of payment to the originating creditor, who then can take legal action to seize assets or garnish wages. Collection agencies will also report non-payment to credit bureaus, which will likely affect your credit report and make it more difficult to open other accounts.

Since many collection agencies and their representatives work on commission, they may resort to guilt and intimidating tactics. Fortunately, you can put a stop to their letters and phone calls by:

• Sending a cease and desist letter. The company has to respect this request but may decide to sue you.
• Contacting the financial institution. If you can work out a payment plan, even if it’s a small monthly payment, it should be enough to prevent you from having to deal with a collection agency. You may also be able to reach an agreement about debt settlement and have your debt decreased. Keep in mind, though, that you may have to pay taxes on the settlement.

Know Your Rights When Dealing with Collection Agencies

The government is sympathetic to consumers who have to deal with collection agencies and has set up a number of guidelines companies must adhere to. According to the Federal Trade Commission, collection agencies and their representatives, may not:

• Call you during the evening or early morning. They may only make their calls between 8 a.m. and 9 p.m.
• Harass you or use inappropriate language. This includes making violent threats or threatening to have you arrested.
• Misrepresent their letters as legal documents.
• Repeatedly call you throughout the day or at your place of employment if such calls are not allowed at your work.
• Speak to anyone else about your debt. They may not leave information about your finances on an answering machine or tell anyone else why they are calling. This does not apply if you have a lawyer, in which case all their communications should be with your attorney.
• Collect more money than what you originally owed.

If you are dealing with a collection that has broken any of these rules, file a report with your state Attorney General’s office..