If you are one of the roughly 70 million American adults who are in debt collection, you may already have a pretty good idea of what this means. Either way, it can be good to have a good understanding of the process, especially if you’ve just had your first account collected by debt collectors.
When people borrow money and fail to pay it back, there are various mechanisms to recover the amount owed. Often the full amount will never be recovered. With a house or a car, lenders can repossess this asset to make up for their loss. But what about unsecured debt like credit cards?
People who leave their overdue credit card bills will most often be contacted by a debt collection agency. These are organizations dedicated to the practice of collecting unpaid debts. Essentially, the original lenders, such as a credit card company, will sell the overdue debts to collectors for a hefty discount. This allows the lender to immediately cut their losses and move on, while also giving the debt collector the opportunity to profit if they can find a way to get the money that is now owed to them.
Due to the derivative nature of debt collection, agencies in this area tend to be incredibly headstrong in finding ways to get paid. Anyone who has just realized they have a debt in collection may wonder if they can negotiate with a collection agency. And if so, what does this imply?
How to negotiate with a collection agency?
In short, yes, you can negotiate with a collection agency. In general, this is a fairly common occurrence if you do owe money. At the same time, there are other things you should do before negotiations start, especially if you think there is a mistake.
The first step when the debt collectors contact you is to ask them to prove that you actually owe money. You should do this whether you really mean it or not. Often the documentation will be lost or mixed up between the original lender and the debt collector. If the collector cannot validate your debt, they cannot force you to pay it. Some states also have statutes regarding limitations on debt collection. It is essential to read these rules before taking action. These points are a big part of why you should take a break before getting into negotiations.
If the debt is in fact yours, and the collection agency can prove it, then you will need to determine your best course of action. Ignoring the problem will likely lead to you being sued by collectors, who will almost certainly win court judgment if they have hard evidence. This will likely lead to wage garnishment or other negative outcomes for you.
While no one wants to pay off overdue debt, sometimes you just have to face the music and make a plan with the collection agency. Being proactive about the process will almost always serve you better than hoping it goes away.
What are your rights as a consumer with regard to collections?
Dealing with debt collectors is a grueling process, as they are usually quite intimidating. Whether you are in negotiations or have just been contacted for the first time, you want to know your rights as a consumer. The FDCPA (Fair Debt Collection Practices Act) sets out some of the things that collectors can and cannot do. For example, they can’t call you in the middle of the night (unless you tell them it’s okay). They also cannot threaten or harass consumers. You should take a look at all the rules in the FDCPA to get a better idea of your rights.
Ultimately, it’s likely that negotiating will be part of dealing with your debt collection. Make sure you work to understand this process and the rules around it to improve your results.