Discover Debt Freedom!

With the economy in the state that it is in today, many individuals are having their first dealings with a debt collection agency.  Whether it is because an income earner in the household has lost their job, work hours have been cut, or interest rate increases has made it difficult to pay their bills, these first encounters with a representative from a collection agency can be a frightening and distressing event.  There are some rules that all collection agencies must follow when dealing with an individual that has a delinquent account.

Collection Agencies Cannot Misrepresent Who They Are.
A collection agency is forbidden to misrepresent who they are by claiming to be an attorney or from the credit bureau.  They also cannot misrepresent documents sent to the individual as legal documents if they are not actual legal documents.  In all dealings with the individual, they must state who they are and why they are contacting the individual.

Collection Agencies Cannot Be Verbally Abusive.
Collection agency representatives are prohibited from using obscene or profane language when talking to the individual about the debts that that the agency is alleging is owed. They are also prohibited from threatening violence or harm to the individual as a result of the debt not being paid.  Collection agency representatives also cannot state that the individual will be arrested for not paying the debt.

Collection Agencies Must Provide Written Documentation Of Debt.
If a collection agency representative contacts the individual to tell the individual that the individual owes money to the company, within five days of the initial contact, the collection agency representative must send a written notice describing the debt, listing the amount owed, and disclosing the steps that can be taken by the individual if they believe that they do not owe the debt.

Collection Agencies Must Respect Your Workplace.
The actions of the collection agency are not allowed to interfere with the individual’s employment and this includes calling the individual at work when their boss disapproves of the contact.  If a collection agency repeatedly contacts the individual at work knowing that it could affect their employment, they could face sanctions from the Federal Trade Commission.

Collection Agencies Cannot Contact You At All Hours.
Collection agencies are not allowed to contact individuals after 9 o’clock at night or before 8 o’clock in the morning.  Collection agencies must follow these time guidelines unless permission is given by the individual that they would like to be contacted outside of these times.

You Can Request That The Collection Agency Cease Contact.
People that are being contacted by aggressive collection agency representatives repeatedly can have the contact stopped by submitting a written request to the collection agency requesting that they stop all contact.  Once the request has been received by the collection agency, they cannot contact the individual for any reason other than to tell the individual that their letter has been received and they will no longer contact the individual.  Stopping the collection agency from contacting you does not erase the debt that is owed and the collection agency may decide to sue you in court to recoup the funds that they are owed since they now have no other way of obtaining a payment from you.

Many people that are facing debt problems are in denial.  They avoid picking up their phones for fear there is a debt collector on the line, avoid opening bills, and do not do anything productive to correct their circumstances.  These people are making the worst mistake in finance – ignoring debt. 

There are many productive things that you can do to decrease debt and improve your credit rating, as ignoring debt obligations will only cause more problems.  Using these methods is not always easy, but they will make a difference in your financial stability.  Following this straightforward guide will help you reduce your obligations and ensure that your credit profile is not damaged further.

Avoiding Lenders Is A Big No-No

Avoiding the problem by refusing to open your bills and refusing to answer calls from lenders is not going to do anything but ruin your credit and increase the amount of debt you are carrying.  To get out of the circumstances that you are in, you will need to know the amounts that you owe to each lender and create a plan for paying each of these financial companies the money that is owed.  There are many different types of financial products that can help you make these repayment plans, including budget log books, financial planning software, internet websites geared towards reducing debt, and debt reduction programs and classes.

Cut Spending

The first thing that you should do when facing debt problems is to cut spending on non-essential items.  If you are having trouble paying your bills, you should not be paying for lattes at the local coffee shop or gym memberships.  Cut excesses from your life and reapply the money saved to your debts.

Talk To The Financial Companies

If you are facing unexpected debt problems, such as the loss of a job or medical issues, talk to the financial companies and explain your current circumstances.  Many lenders have procedures in place to help people facing these types of issues and they can work out an agreement with you to help you until you can get back on your feet and make full payments again.
 
Avoid Overusing Credit Cards

Many people begin using credit cards to pay for everyday purchases when they are facing a large amount of debt.  Placing purchases on a credit card is not going to solve the issue and the interest rate on the balance carried on the credit card will only drive you deeper into debt.  Instead of using a credit card, you should start paying cash for everything and marking it in a notebook as soon as the money is spent.  This will help you get a handle on your finances and show you exactly what you are spending your money on so that you can make more informed financial choices.

Many people today are finding themselves on the wrong end of the debt collection process for the first time.  The number of late payments and missed payments has skyrocketed over the last couple of years as many families have seen the loss of a job, a decline in their wages, and credit lines cut down to the bare minimum.  Knowing how the debt collection process works can help reduce some of the fear and shame that many people have when faced with financial problems that lead to debt collection.

Initial Steps

There are certain steps that are typically followed during the debt collection process that makes the process predictable.  In many cases, a creditor will not take any action within the first thirty days of non-payment on an account other than adding a late payment charge to the account balance.  The reason for this is that many people miss payment deadlines and make up the missed payment within the first thirty days of delinquency.  Many businesses feel that chasing after individuals that are less than 30 days past due on their accounts wastes money and is a bad business practice.

After the account has been delinquent for more than thirty days, representatives of the creditor company will begin trying to make contact with you regarding the missed payment or payments.  These contacts may be by mail, by email, or by telephone depending on the company and their policies.  At this point, you are still dealing directly with the company and may be able to negotiate some type of payment plan to bring the account current.

Additional Steps

If the company is unable to contact you or still has not received a payment after 30 days, the company will take further action to encourage the account holder to bring the account current.  First, they will report the delinquent account to the major credit bureaus, effectively reducing the person’s credit score and placing a negative mark on the person’s credit history for the next seven years.  Once this information has been placed in the person’s credit history, there is no way to remove it unless the information is inaccurate and the inaccuracy can be proven to the credit bureaus.

If this does not produce the desired effect of having the customer bring their account current, the creditor may choose to enlist the help of a debt collection agency.  Because the debt collectors are typically paid on commission and only make money when they get you to pay money, they are much more aggressive in getting you to settle your debt than the representatives at the original creditor company.  The debt collection company will continue to call your home or office and send notices by mail to try to get you to pay off your debt until the statute of limitations for collecting the debt has passes, typically a period of seven years.

As collection agencies get bolder and more companies sell them debts that they have been unable to collect, more and more people are finding notifications that they owe old debts in their mailbox or on their answering machines.  Although the statute of limitations on most debts is seven years, most individuals do not know how long ago the debts were incurred or when the last payment on the debt was made.  There are several options that can be used for dealing with an old debt and the method chosen will depend on the individual’s specific circumstances.

Ask For Debt Validation
One of the first things that you should do when informed of an old debt is ask the collection agency that sent the notification to validate that the debt is yours and is a valid charge.  There are a number of unscrupulous collection agencies out there that sent notifications for fraudulent or legally uncollectible debts in the hopes that the person will panic and pay the debt without asking too many questions.  If the collection agency is unable to validate the debt, then notice should be given to them in writing that they need to stop contacting you about the matter and if they contact you about the debt after receiving this written notice, they can be reported to the Federal Trade Commission (FTC).

Debt Settlement
In many cases, if the debt is more than a year old, the collection agency will be willing to settle the account for a percentage of the total so that they are paid something instead of wasting time and energy for no payment at all.  If you choose to settle the debt, make sure that you have the terms of the settlement in writing from the collection agency and that you check your credit report after the payment has been made to make sure the collection agency has reported the account as settled.  It is also a good idea to keep a copy of the check or money order used to pay the settlement amount just in case you need it as proof of payment down the road.

Legal Representation
If the debt is not valid or the collection agency is harassing you, you may want to consider hiring a lawyer for legal representation.  Once you have notified the collection agency in writing that you are being represented by a lawyer and all further communications should be directed to them, the collection agency is no longer allowed to contact you directly.  If the debt is not valid, then the collection agency will generally not risk fighting with a lawyer in court on a case that they are going to lose.

In today’s world of mass credit defaults, many people are finding themselves facing the debt collection process with one or more of their creditors.  Understanding how this debt collection process works can help a person determine what course of action they should be taking and what will happen next.

The First 30 Days
In the first thirty days after a bill has become due, the company that has sent the bill takes some predictable actions.  For the first two weeks, the company may not do anything about the payment except charge a late payment fee to the account, which can be for any amount between $5 and $50.  The amount of the fee is typically dictated by the company and disclosed in the terms and conditions of the service agreement that was accepted by you.

After the first two weeks have passed, the company may begin to call to remind you to make your payment or to inquire when a payment will be made.  The calls are typically made by representatives of the company that holds the account and automated messages are left by the company for the person to contact the company about their account at their earliest convenience.

Between 30 And 60 Days
After 30 days have passed, the company begins to take additional action against the account holder.  It is within this time period that most companies report the missed payment to the three major credit bureaus for reflection on the person’s credit history.  Once this action has been reported to the credit bureaus, it will remain on the credit report for up to seven years.  The only way for this item to be removed from the credit history is for the person to dispute the information and prove that an error was made.

Once the missed payment has been reported to the credit bureau, the calculation of your credit score will reflect the missed payment.  The effect that the missed payment will have on the person’s credit score will vary from person to person depending on what other information has been reported to the credit reporting bureau within the last few months.  After the original missed payment has been reported, the creditor may choose to report the status of the account on a regular basis until the missing amount has been paid to the company.

At any time after 90 days, the creditor that holds the account can hire a debt collection agency to attempt to collect on the debt on the company’s behalf.  These debt collection agencies are responsible for maintaining contact with the debtor to attempt to collect on all or part of the debt that is owed.  These debt collection agencies can pursue you for the debt that is owed until the debt has expired but they are often interested in making a deal for the repayment of part of the debt to settle the account.

Debt collectors calling to say you must pay a debt that you owe is a call that many people have experienced in the last few years.  Most of the people that work for debt collection agencies are very respectful of the people they are attempting to collect from, but some companies are abusing the trust of people that they are contacting by trying to collect on past debts that the individual is not legally obligated to pay because the debt has expired.

Understanding Expired Debt

A debt that has expired is a debt that has existed for more than seven years and has not any type of activity on the account throughout that time.  Legally, a person is not obligated to pay these debts due to a legal statute of limitations placed on collections of debts across the nation. These laws were put in to place in order to prevent the collection agencies from attempting to collect on debts that are virtually impossible to validate.

Even though this type of debt collection is illegal, there are some unethical debt collection agencies that still try to collect on these debts anyway. Why do they do it? Simply put, they are relying on a person’s lack of knowledge of the laws surrounding debt collection to collect money that they are not legally entitled to. These companies have nothing to lose due to the fact that all they have invested in the account that they are attempting to collect on is time, nothing else. 

The debt collection companies do not have any affiliation with the original account holder as they have typically purchased the debt from the original company for pennies on the dollar or have been assigned the account from another company. This means if they can collect any portion of the original debt it becomes nearly 100% profit for the debt collection agency.  For this reason, many of these companies use highly aggressive collection tactics that a legitimate collection agency would not use for fear of being held accountable for the tactics in court. These unscrupulous companies want to achieve a level of fear that would get the individual to pay the debt more quickly without asking too many questions about the transactions.

Can I Do Anything About It?

Yes.  If you know a company is trying to collect on a debt that is more than 7 years old and there has been no activity on the account, you can simply inform the debt collection agency that is attempting to collect the debt that you are fully aware of the laws surrounding the debt, and any further attempts to collect that debt will cause you to report them under the Fair Debt Collection Practices Act.  Sometimes alerting these companies just is not enough, as there have been cases where they have actually changed dates to reflect current activity on the debt, so they can extend the period of time to make the debt valid. If you find this to be the case, report them under the Fair Debt Collection Practice Act without hesitation. If you need to you can even take the collection agency to small claims court and have them pay you damages for harassing you about an expired debt.

The collection industry has changed a great deal in the last ten years.  Where companies used to assign a debt to their collection department or to a collection agency and paid them after they has collected the debt, now companies are selling their debt to the debt collection agencies at a fraction of the balance of the account.  If the collection agency is able to collect the rest of the debt from you, then they get to keep the difference between the money that they paid to the company and the money that you paid to them.

This trend has resulted in some debt collection companies using some unscrupulous practices in order to collect a debt that they think that you owe.  They attempt to collect debts that they are not legally entitled to, add additional fees to bump up their profit percentage, or use deceptive practices to get you to pay money that you do not owe.  But there is a way to ensure that you are only paying debts that the collection agency is entitled to and that is by asking for debt validation.

There are several things that the debt collection agency can provide for debt validation.

Proof Of Debt – the debt collection agency can provide you with proof that the creditor has assigned or sold the debt that you owe to the creditor to the collection agency.  The debt collector would not be able to legally require you to pay the debt without this paperwork and any court would throw out the case without it.  If the debt collector refuses to provide proof of debt to you, it is a good indication that the collector has no legal right to collect the money for the debt.

Account Statements From Original Creditor – the debt collection agency can provide you with account statements from the company that the account was opened with or the debt was originally owed to in order to prove their right to collect the debt.  This will also ensure that excessive fees have not been added by the collection agency to the total amount that was owed to the original creditor.

Copy Of Original Signed Credit Card Or Loan Agreement – if the debt collection agency can provide you with a copy of the signed original agreement between you and the original creditor, then they have a legal right to collect the debt on behalf of the original creditor.  It does not matter whether the debt was assigned or sold.

If the company cannot or refuses to produce at least one of these documents for you to prove that they have a legal right to pursue you for collection of the debt, then you should not send them any money regardless of whatever threats they make.  Without at least one of these documents, their case for collection will never hold up in court and they know this, which is why they will make dire threats and lie to you about the consequences of your actions if you do not pay them the money.  Do not be fooled and do not pay any debt collector money without first having the debt validated.

There are many people across the nation that are deeply in debt and many of these individuals have had to deal with a debt collection agency at some point in the last several years.  The debt collection industry has repeated come under fire in recent years for aggressive debt collection practices and many individuals are aware that they can report aggressive collection agents and agencies to the Better Business Bureau to document the harassing actions.  What many individuals do not know is that the Federal Trade Commission of the United States Government has passed a Fair Debt Collection Practices Act that specifically details the rights of the individuals being contacted by the debt collection agency and lists the actions that debt collectors are not allowed to take.

1.  You Can Stop The Collector From Contacting You
Many individuals being contacted repeatedly by aggressive debt collection agents do not know that they can legally have the harassing phone calls stopped by submitting a request in writing that the collection agency stop contacting them.  Once the request has been received by the debt collection agency, they cannot contact you for any reason other than to tell you that your letter has been received and they will no longer contact you.  Stopping the collection agency from contacting you does not erase the debt that is owed and the collection agency may decide to sue you in court to recoup the funds that they are owed.

2.  Collection Agencies Are Not Allowed To Contact Debtors After 9pm Or Before 8am.
The hours in which the debt collection agency is allowed to contact you are explicitly spelled out in the Fair Debt Collection Practices Act.  Debt collection agencies must adhere to these time constraints unless they receive permission from you to contact you outside of these times.

3.  Debt Collectors Must Send You A Written Notice Describing The Debt.
If a debt collection agent contacts you to tell you that you owe money to the company, within five days of the initial contact, the debt collector must send a written notice describing the debt, listing the amount owed, and disclosing the steps that can be taken by the debtor if they believe that they do not owe the debt. 

4.  Many Aggressive Debt Collection Practices Are Prohibited.
Debt collection agencies and their agents are expressly prohibited from the following:
- Using obscene or profane language when talking to the debtor
- Threatening violence or harm
- Misrepresent who they are by claiming to be an attorney, from the credit bureau, etc.
- State that you will be arrested for not paying the debt
- Collect any amount greater than the debt owed
- Misrepresenting documents sent to you as legal documents when they are not
- Publish the names of individuals that they are attempting to collect a debt from

5. Debt Collectors Cannot Repeatedly Contact You At Work If Your Manager Disapproves.
The actions of the debt collection agency are not allowed to interfere with your employment and this includes calling you at work when your boss disapproves of the contact.  If collection agency repeatedly contacts you at work knowing that it could affect your employment, they could face sanctions from the Federal Trade Commission.

A more complete list and description of debtor’s rights are listed in the Fair Debt Collection Practices Act released by the Federal Trade Commission.  If a consumer has experienced any of the prohibited or harassing tactics listed in the Fair Debt Collection Practices Act, they may report the debt collection agency to the Federal Trade Commission or to the Attorney General of their state for investigation.

One of the newest and more questionable practices used by collection agencies today are the use of Collection Triggers to attempt to collect on the debts that they hold.  Never heard of Collection Triggers?  Well, neither have the other thousands of individuals whose personal information is being sold by the credit reporting bureaus to collection agencies across the nation.

What Is “Collection Triggers”?

Sold under the name Collections Triggers by leading credit reporting agency Experian, this software program is designed to take the information about a collection agency’s list of collection accounts and monitor those accounts in Experian’s system for any activity on the account.  Once activity on the account has been detected, the collection agency is notified and any new contact information given to the credit reporting agency is then given to the collections agency.

This allows the collection agency to find you every time something is reported on your credit report as they now have your address, phone number, and the fact that you are paying an account or have opened a new account recently.  Regardless of whether the collection account that the agency has on you is valid or not, for as long as they wish they can access your personal information and can harass you for accounts that you may or may not owe.

Other Issues Arising

“So what?” you may say, “I don’t owe any creditors any money so this does not apply to me.”  Well, you couldn’t be more wrong.  The technology used to create Collection Triggers is already being modified to be applied to other industries. 

For example, if an individual begins the procedure to obtain a mortgage and their credit is pulled to determine whether or not they can afford the mortgage, the credit reporting agency is alerted that you are shopping for a mortgage.  The credit reporting agency then sells your information to competitors of the mortgage company you applied with so that they know that a potential customer is looking for a mortgage.  The result is that the consumer is swamped with phone calls, solicitations, and mailings that offer alternates to the mortgage company that they initially chose.

For some individuals, this competition would be welcome but many others are alarmed that their personal information would be sold to companies without their consent.  There are no conditions put into place to ensure that only reputable companies are able to obtain consumers personal information and the threat of identity theft or being signed up for programs that you did not agree to is high. 

When a company misuses a consumer’s information, which can cost the consumer a great deal of money, the burden of proving that the information was misused is on the consumer.  Even if the consumer wins their case, they still may be on the hook for hundred of dollars in charges, have negative information reported on their credit report, and there is no guarantee that the issue will not occur again if their information is sold to another company.  There is currently no way for a consumer to opt out of the system and in reality, your information has probably already been sold to any company that was willing to pay for it.

When it comes to dealing with some parts of the debt collection industry (the mortgages section is a bit of an exception), it can often be much more akin to dealing with a scummy neighbor rather than an actual professional business. A portion of the debt collection industry will do whatever they can, regardless of how immoral it may be, to get the money they think they are owed. They will call children when their parents aren’t home and tell the children that their parents will go to jail if they don’t pay their debts. They will call several times a day and disrupt your life as much as possible. They’ll call your neighbors and tell them that you’re a deadbeat. They’ll even try to get your family members to pay on the debt. This industry is out of control. Some debt collection agencies are now trying to collect upon debts that are past the statute of limitations and breaking the law to do so, fortunately you can fight back.According to federal law, you have no legal obligation to pay any debt that has had no activity in the last 7 years. If you had some bad credit card debt in college a decade, you legally don’t have to pay it. There’s still a moral obligation to be a good citizen and make good for the debt that you have, but you’re not bound to pay it according to the law.
If you borrowed money in January of 2001, it’s very likely that in December of 2007, just before the statute of limitations expires on your debt, you’ll start receiving calls from debt collection agencies trying to get money out of you. It’s very likely that they illegally changed the date on the debt. They will claim hat there is some sort of activity on your account making it active again, resetting that 7 year expiration clock and continue to try to collect the debt even though the statute of limitation on collecting that debt has expired.

Collection agencies are increasingly changing the date on debts, even though no activity has occurred. According to the Federal Fair Debt Collection Practices Act, this practice is illegal. If a debt collection agency does this to you, you can sue them in small claims court at your local courthouse, and they’ll have to come and defend themselves. You’ll likely be able to get that debt removed from your credit report once and for all and potentially receive some sort of punitive damages.

If a debt collector tries to collect a debt that’s past the statute of limitations, you have no obligation to pay it. They will probably illegally change the date of the debt and try to collect it, but you don’t legally have to pay it, and you can fight back.