If you went through a tough financial time in the past, it most certainly would include debt collectors reaching out to you to collect on a debt. You might have missed some in the past and they are now starting to catch up. Debt collection has been getting a lot of flack because of the questionable tactics of some collectors.
But you need to understand that there are legitimate debt collection agencies that have the right to call you and ask you to pay up on your obligation. This is because there are a lot of stories about phantom debt collection agencies that this is what sticks out when the topic arises. The tactics they use puts the whole industry in a bad light.
There are a lot of complaints about collectors harassing consumers about their debt payment. They call either too early or too late at home to collect on the account. They even threaten to call consumers in the office or they even call them at home and make all threats they can think of just to pressure the consumer so they pay up their debt.
According to data by Ibisworld.com, debt collection is a $14 billion industry and this is one of the reasons why these companies are thriving. This could also be one of the reasons why there are collectors who are resorting to questionable tactics just to collect on a debt. But you need to remember that there are legitimate collection agencies operating out there that can be calling you about your unpaid financial obligation.
Talking to debt collectors
If you missed out on a payment in the past, there is a big chance that you will be getting a call from a debt collector. Here are a few things you need to look into when you find yourself on the other end of the line with one of them.
You are protected under the law as a consumer
Even if it is a legitimate debt, you still have ample protection provided for by the law which debt collectors must adhere to. One of the first things you need to clear up is your state’s statute of limitations. This refers to the period when debt can be legally collected from people. Once this has passed, they are no longer allowed to go after you for the debt.
You also have rights under the law with how debt collectors reach out to you to collect a debt under the Fair Debt Collection Practices Act as shared by FTC.gov. Under this act and unless you specifically agree to it, debt collectors are not permitted to reach out to you at inconvenient times such as early in the morning or late at night. You can also request for what is called a “validation notice.” This is a written document that summarizes the debt account which can include the amount you owe and even the name of the creditor. This is to be given to you five days after their initial contact with you.
Keep your emotions in line
Debt collectors are trained professionals and they bound by law to use legal means to collect a debt. At the end of the day, you really should pay your debt and not sweep it under the rug hoping it goes away. It will always come to haunt you whether through debt collection calls or taking a hit in your credit score and having a hard time getting approval for a loan.
With that being said, debt collectors are trained to prey on consumer emotions and use various tools in helping them collect payments. They might talk in a way that make you feel in panic and urge you to make a payment right there and then. This can restart the statute of limitations and make you liable again for the next few years. Keep your emotions in check and talk to the collector with a clear mind.
Take the initiative
If you know that you have a debt amount that you have yet to pay, it might be a good idea to take control of the situation rather than constantly looking over your shoulder. Call your original creditor and initiate the conversation and let them know of your intention of paying your debt. If it is still with them then you can start discussing repayment.
If they already unloaded your debt account and sold it to debt collection agencies, ask for details so you can get in touch with the agency that has your debt.
The main takeaway from this is to take control of your debt situation and hopefully catch your debt collectors off guard. They are used to being the one in control making the calls and demanding payment that when the tables are turned, you might see a better side to the collectors and they might play fair and be honest with you.
Never stop negotiating
When you start talking to debt collectors, you need to remember that you can always negotiate the amount that you have to pay. This stems from the fact that debt collection agencies buy debts for pennies on the dollar. This means that you can start negotiating for an amount that is about 10% of the original payment.
There is big chance that you end up somewhere in the middle but that is better that having to cough up for the whole amount. But you should not stop negotiations with just the amount because you need to ensure with what happens next. You have to secure a written agreement that the debt will be considered paid and that they will not just pass it on to another collection agency.
How to avoid going into collections
One of the best ways to avoid debt collectors is staying away from the debt itself and here are a few things to keep you on that path.
- Have a budget that includes all your financial responsibilities. It is important that when you start putting your budget together is to put everything there. List down all your sources of income and put in all your expenses regardless how big or small they are. One of the most crucial factors in this is to account for all your debt payments such as student loans, credit cards and others. It is important that you get an overview of all your financial obligations because there could be times when you forget about a debt only to find out after massive late fees has already been added.
- Build up your reserve funds. Your emergency and rainy day funds will help you get through some of your toughest financial times. The amount you need depends on the number of months you want to prepare for and your expenses on a monthly basis. You need to prepare for big emergencies such as losing your job to even the smallest ones like a busted light bulb at home.
- Increase your income. One of the best ways to prevent getting into collections is making sure you get to stay current with your payments and increasing your income can go a long way in helping you keep at it. Try to look at earning more on the side through your hobbies or check how you can get a raise in the office.
Debt collectors are just part of the process and there are ways to talk to them. But the main point you need to focus on is to try and prevent your financial accounts from getting into collections in the first place. You need to keep tabs on all of them and ensure that you are able to pay them in a timely manner.