Wednesday, 30 October 2013

Know Your Rights when an Account is Sent to Collections

Debt collectors perform a thankless job attempting to collect the money owed to other companies. Anyone who has had an account sent to a collection agency can attest to the imposing tactics that are sometimes used to try to get you to make good on a legitimate debt. From the perspective of banks and lenders, what they do is an important aspect of managing resources and protecting an institution’s bottom line. We really can’t fault companies that are only looking to get what’s owed to them.

Loans from a bank or financial institution that require collateral, such as an automobile loan or mortgage, rarely send to a collection agency – instead, the item put up as security is repossessed, if the account goes into default. For unsecured credit like credit card balances, the only recourse when an account goes into default is to send the account to a collection agency.

In 2012, Americans owed more than $11 trillion in overall debt, with $852 billion of it on credit card accounts. There’s no way to calculate the effect that the amount of debt has on our economy, but there’s no denying that it has an effect on interest rates and the availability of credit. While there are credit options for individuals with poor credit, credit cards for bad credit will not provide lower interest and perks a good credit score will land.

Debt collectors work on commission and earn a percentage of whatever they successfully collect. A debt collector will work with debtors to get them back on the road to repayment. They are authorized to put in place a new repayment agreement with reasonable conditions and generally look for a percentage of the debt to be paid upfront as a good faith gesture.

Like an IRS tax agent, debt collectors have a bad reputation with anyone who finds themselves on the receiving end of a phone call. Though what is often not realized is that the dread consumers feel is a result of stories told by unscrupulous collectors rather than the process itself.

Bad collection agents may resort to unlawful tactics that put undue pressure on debtors at a time when stress levels are already high. Here are the facts you need to know and things an unscrupulous debt collector may leave out to confuse you into an unfair agreement.
• Settlements are Negotiable - Don’t fall for a one-size-fits-all offer. Unscrupulous agents will claim to be offering the only settlement you’ll get an attempt to convince you that it’s your last resort. Collection agencies buy unpaid debt for pennies on the dollar making it possible for a settlement to be negotiated within reason to better work for you.
• Question the Total Debt – If you have multiple accounts being handled by one collection agency, don’t take the total at face value; it may include debt you do not owe. The statute of limitations may have expired, the period after which creditors cannot sue you to collect the debt. The debt may have been paid off or you’ve already settled with the debtor.

• Cease and Desist – Collection calls must stop once you send a letter asking them to cease. Debt collectors that fail to comply with the law should be reported immediately to the attorney general of your state and the office of the FTC. If a caller makes a threat of possible arrest or reveals details about your debt to people you know; friends, family, neighbors, or fails to comply the set legal restrictions, file a complaint with the attorney general of your state.

• Report Harassment – The law protects you from threats or harassment. Obscene language, threats of any kind intended to intimidate should be reported. Callers are only allowed to contact you between 8 a.m. and 9 p.m. You can’t be threatened with legal action unless they actually intend to follow through with a lawsuit. One tactic that borders on intimidation but is allowed is to bring a third party into the conversation. Don’t be rushed into an agreement before you are sure you can handle the terms.

Within five days of having started a dialog with a collection agency, you will receive a validation letter confirming the situation. It will show you who you owe, how much and what you need to do, including what to do if you do not believe you owe the money.
Know Your Rights

The Fair Debt Collection Practices Act was enacted in part to help consumers deal with aggressive debt collectors. This law covers unsecured and secured loans including credit cards, car loans and mortgages that are sent to collection agencies. You have the right to demand through writing that all contact cease immediately. You can expect them to make a final call to acknowledge the request you have made and that they give you notice of legal action, if they are planning to proceed with a legal lawsuit.

If your rights have been violated in any way, write a detailed letter to the creditor to work toward a resolution. If a substantial amount of money is involved or you wish to file a formal complaint with the Federal Trade Commission, you may want to consider seeking advice from an attorney. Never settle anything before you are sure it’s in your best interest and you are sure you can honor the agreement decided on.

Vanessa May is a blogger and content writer for wowcreditcardsdotcom who enjoys writing on finance related topics. Her writing is primarily on credit and debt issue, but also enjoys sharing helpful tips on living a financially balanced lifestyle and saving money. She uses educational and other reputable sources to provide helpful information to assist consumers with their financial management decisions.

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Know Your Rights when an Account is Sent to Collections


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