What Is A Collection Agency?
First, you need to know what a collection agency actually is. When you owe a debt, the company that you owe has to keep that debt on their records for accounting purposes. They may send you bills and notices and make other efforts to get you to pay, but they’ll only try for so long. Once they decide that you’re not likely to pay, that company may choose to sell your account to a collection agency.
A collection agency makes its money by purchasing debts at a discount and then collecting as much as they can of the full amount. For example, say you owe $5,000 in credit card debt that you haven’t paid. When the credit card company decides that you’re not likely to pay them back, they’ll sell the account to a debt collection agency for a much smaller amount – maybe just 10%, or $500. That agency will then take over trying to get you to pay.
Because their profit depends on getting you to pay, collection agencies may be very aggressive about trying to get your money. Because of abuses by collectors, federal and state laws have been enacted to protect borrowers from harassment and abuse.
Even with the protection of the law, it can be scary and frustrating to field collection calls. Here are our top tips for how to handle it.
1. Record Everything
Keep a detailed record of all communication between you and the collection agency. That includes phone calls, email, snail mail, and any other mode of communication. Mark down the time and date you received each communication and what it said.
This has 2 benefits. First, you’ll have a complete record of all the information pertaining to the collection. Second, if the collector is harassing you and you need to file a complaint, the record will act as evidence.
2. Get It In Writing
The first notice you get that your account has been sent to collections often comes in the form of a phone call. It can be a little frightening and little overwhelming, so it’s easy to miss the details over the phone. If you get a call about a debt, you can request that they contact you in writing instead. By law, they must send you a written record within 5 days describing the debt, the creditor, and the steps to take if you want to dispute the debt. If you request it, they must also send all future communications in writing.
Your communications should be in writing, too. Collectors love to get you on the phone because you have to react on the spot. They’ll try to goad you into admitting that you owe a debt or agreeing to paying on the spot without full information. You don’t want to be in that position. Instead, keep quiet. Don’t admit to anything, don’t promise anything, and don’t pay anything. Once they’ve sent a written record of the debt to you, you should respond only in writing. That gives you time to think about what you want to say so that you don’t get caught off guard. Dealing with collection agencies is hard enough without the element of surprise.
In addition to giving you a clear and detailed picture of what’s going, this makes your record keeping easier.
3. Ask For Proof
Remember that when you’re dealing with a collection agency, you’re not dealing with your original creditor. These agencies don’t always handle the paperwork appropriately and may not even actually have a right to collect your debt. If you’re contacted by a debt collector, you should request full information about the debt in writing. Ask for proof that they actually own the debt and proof that the debt is still collectible – California has a 4-year statute of limitations on debt. That means they can’t collect a debt that’s more than 4 years old. You should also ask for proof that they’re asking for the right amount and check it against your own records. Some dishonest companies will claim that you owe more than you actually do in the hopes that you’ll pay it without checking.
4. Explore Your Options
A call from a collection agency doesn’t mean you have to pay that debt on the spot. The company may not have the right to collect the debt. They may also be willing to settle for less than the full amount.
If you believe that you don’t owe the debt, that the collection agency doesn’t have the right to collect, that you owe a different amount than they’re asking for, or that the statute of limitations has run, you should dispute the debt before you pay anything. The written notice from the collection agency will explain the procedures for disputes with that particular company.
If they have the appropriate proof that the debt is legitimate, you still may not have to pay the full amount. Ask the collector about your options for debt settlement, where you pay less than the full amount but the debt is considered paid in full. Note that settlement may impact your credit score, but not as much as nonpayment.
5. Know Your Rights
When you’re dealing with collection agencies, they’re betting that you don’t know your own rights. They don’t want you to ask questions and they don’t want you to know the rules. That makes it easier for them to intimidate you into paying. The best thing you can do is learn your rights – remember that debt collectors are barred by law from harassing you early in the morning or late at night, contacting you many times per day, or contacting third parties about your debt.
When in doubt, consider reaching out to an experienced local attorney. Bring the record of your interactions with the collection agency and any financial records that have to do with the alleged debt. An attorney can help you determine if the debt is legitimate and how best to go about dealing with it. You may be entitled to compensation if the collector is harassing you.
We Can Help
If you’re dealing with collection agencies, we may be able to help. Take advantage of a free case evaluation and consultation with one of our experienced attorneys today to learn about your options and your rights. Don’t let collection agencies take advantage of you.
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