Know your rights with debt collectors

You have many legal rights when being pursued by a debt collection agency. These rights come from the Fair Debt Collection Practices Act, or FDCPA, passed in 1977 to protect consumers from abusive debt collection policies.  Some of your rights include:

Contact methods
A debt collection agency can contact you by telephone (most common), mail, fax, or in person. They may only contact you between the hours of 8 AM and 9 PM, unless you give them permission to do so otherwise. If you inform the debt collector that you are not allowed to receive phone calls at your employer, they must also cease from contacting you there.

Providing you with a written notice
After you are contacted for the first time by a debt collector, they have to provide you with a written notice notifying you of the amount of money you owe, the creditor whom you owe the money to, and how you to proceed if you do not believe you owe the money.

Contacting other people
A debt collector can only contact people to find out where you live, where you work, and how they can reach you on the phone. Usually, they cannot tell them you owe a debt.

Not allowed to harass or intimidate
This leaves a lot to be interpreted, but debt collectors are not allowed to harass, abuse, or oppress you or any third party they contact about your debt. It is clear, however, that contacting you several times a day is not considered to be harassment.

Debt collectors are not able to say the following:

• If you do not pay your debt, you will be arrested. These are civil matters, not criminal – hence you cannot be arrested.
• They are an attorney (unless they are) or are a part of the government
• You have committed a crime.
• They will garnish your wages or seize your property unless they are not only actively prepared to do so, but that it is legal in your state to do so as well.

Debt collectors are not able to do the following:

• Provide credit bureaus with false information
• Send official looking documents as if from a court or government agency.
• Deposit a postdated check early
• Unless authorized to do so, collect an amount greater than your debt

For a fully copy of the Fair Debt Collection Practices Act, click here.

5 biggest mistakes in dealing with collectors

Nobody likes dealing with debt collectors, regardless if you actually owe the debt or not.  They can harass you day and night, leave messages with friends or family looking for you, and can be very intimidating.  It’s important though to keep your calm — that’s where we start our list:

1.  Lose your cool and screaming, yelling, or lying.
Lying is a big no-no.  “The check is in the mail” should even be avoided, unless, of course, the check really is in the mail.  If you choose to communicate with the debt collector over the phone, realize that your conversation is being recorded.  Any anger, lies, or “lack of character” can be used against you later.

2.  Communicate via letters, if possible.
It’s tempting to pick the phone up when you’re called repeatedly throughout the day and start making payment arrangements/settlements with a collector.  However, unless you’re able to (legally/technically) record the conversation with the debt collector, it’s simply a verbal agreement.  It’s your word against their recording, which more than likely will vanish very quickly.

So, get it in writing.  It’s next to impossible for a verbal agreement to outweigh a written one.  Make sure any letter outlying a payment agreement confirms that your payment is for X debt, and payment of X will pay the debt in full and stop any further collection activities.  You’ll also want to make sure that the agreement notes that your credit report will be updated accordingly.

Another major benefit in communicating by letters is that it allows you to keep your cool.  Think about a previous experience when you went to a car dealership and negotiated with the sales manager to get a deal you wanted.  Now, consider how easy it would’ve been doing it by letter.  Sure, it would’ve been a slightly slower process, but all commitments would’ve been in writing, you would’ve never had the ability to lose your composure, and you’d make sure you got the deal you wanted.

You’d have the same benefit with a debt collector.

3.  Give a debt collector your bank account information.
Never pay a debt collection agency with any payment method that can incur “recurring charges.”  This means your bank account, credit card, etc.  Of course, it’d be illegal to charge any of your cards/accounts without your permission, but funny thing — it seems to occur quite often.

Pay with a money order or cashier’s check.  Nothing else.

4.  Become intimidated.
They may try to appear like an established law firm with thick mahogany desks, manned by guys named Theodore Osmond III.  In reality, you’re dealing with a guy named Tucker who works in a cubicle and drives a Kia.  The point is — debt collectors are people just like you.  They have families, mortgages, watch the New England Patriots choke on Sunday, etc.

Keep this in mind when talking to them and don’t be afraid.

5.  Make commitments you can’t keep.
You got into debt presumably by underestimating the money you had going out, and overestimating the money you had coming in.  Don’t do it again when arranging to pay off a debt.  While you will be eager to pay off the debt quickly and to make the collection agency happy, accepting a payoff plan that you can’t stick to won’t help anything.  It’ll only set you back further.

Goodwill Adjustment Letter

This letter is intended to be sent to a representative of a company that you are currently in good standing with but is currently reporting one or more late payments on your credit report.

YOUR NAME
YOUR ADDRESS LINE 1
YOUR ADDRESS LINE 2

MONTH DAY, YEAR

THEIR NAME (OR DEPARTMENT)
ADDRESS LINE 1
ADDRESS LINE 2

THEIR NAME,

I know you’re extremely busy, but I hope you can find time to consider this request for me. I have been a COMPANY NAME customer since YEAR and during that time, I have enjoyed my experience with your company.

I am contacting you today to see if you would be willing to make a “goodwill” adjustment to your reporting to the three credit agencies. I have NUMBER late payments on the above referenced account that date back NUMBER months. Since that time I have been an exceptional customer paying every month on time.

Because of my overall exceptional payment history with your company over the last NUMBER years, I would like you to consider removing the negative payments from my credit report. I have been a very happy customer in the past and hope to continue a long relationship with COMPANY.

I look forward to your reply.

Sincerely,

FIRST AND LAST NAME

Loans at Department Stores

Everyone has an answer for why we’re in this “credit crunch, financial meltdown, insert buzzword, etc.”  Turn on any cable news channel, or even the local news, and in between the car commercials you’ll find experts trading their theories for air time and a plug.  Experts, economists that have attended college longer than I’ve been alive, telling us why the economy is doing so terrible.

Depending on their slant/bias, the reasons will be:

Consumers - “Consumers shouldn’t have taken credit that was easily available to them.  They wanted a Lexus, but could only afford a Kia, and are forcing financial institutions that were just trying to make a buck into bankruptcy.”

Companies - “People are honest, hardworking folks.  It’s those greedy corporations and fat cats up North that prey on us.  Most people work 23 hours a day and don’t have the time to read contracts or understand what they’re signing.”

Government - “BUSH DID THIS!  People need to elect McCain/Obama/Santa Claus in November to raise employment, fix the economy, and make America great again.”

Big picture aside, generally speaking people have less money, work longer hours (if they can find a job), save less, and are much more concerned about their financial situation than they were 5 years ago.  Why do you think we’re in the situation we’re currently in?  Do you subscribe to one of those agendas above?

Dislike Bush?  Think John Q Public is stupid?  Greedy companies?

I have my own “quotes” on the topic.  It’s a conversation I witnessed.  It took place about 2 years ago at a major department store while I was checking out at the cash register with my wife.  Now that I think about it, it was the last time I went shopping with my wife.

Cashier (to customer in front of us): “Hi, did you find everything alright?”
Customer checking out: “Yes ma’am, I just needed these socks for my husband.”
Cashier: “What would our husbands do without us? (laughter)”
Customer: “Yeah, darlin’. (laughter)”
Cashier: “Your total is $6.53.  Honey, did you want to go ahead and sign up for STORE’s credit card today, you can save an additional 15% on your purchase?”
Customer: “I tried signing up for ANOTHER STORE’s credit card the other day, they said I was declined.  I might as well try my luck with you guys, too.  Why not?”

A credit card — financial contract — loan — was offered to a lady that bought socks.  On the other hand, the lady wanted to give it a try.  After all, that 29% APR on that store credit card would’ve saved her $1.

I blame the socks:  the solution.

Paying Debts with Loans

Getting out of debt is a common goal of many people. One solution that many people use to get out of debt is to obtain a loan to pay off debts.

How it Works

When you use a loan to pay off your debts, you must first obtain a loan large enough to cover the total amount of your debt. If you have credit card debt that totals $4,000 you need to obtain a $4,000 loan. Once you have received the loan, you then disburse payments to each of your creditors. Your credit card debts are paid off and you now make a single monthly payment your lender.

Benefits

Perhaps the most noticeable benefit that you receive from using a loan to pay off your credit card debit is that you no longer have to be hounded by creditors. If you were behind on your credit card payments, you are now caught up. The harassing phone calls will stop as soon as the creditors receive your payment.

Another benefit of using a loan to pay off credit card debt is that you now make a single monthly payment towards your debt rather than several payments. Consolidating your debt in this way makes it easier to budget and manage your money each month.

Depending on the interest rate for your loan, it could be less costly to repay the loan than it would be to repay your credit card debts. This lower cost gives you additional freedom in spending your money.

Drawbacks

You must keep in mind that using a loan to pay off your credit card debt is not reducing your debt loan. Instead, you are only reshuffling the debt in a manner that makes it easier to manage.

If you have been late on your credit card payments, your credit may be negatively affected. This will have an effect on your ability to obtain a loan. If you are more than thirty days late on a single credit card payment, you face the risk of being denied for the loan.

Unless the loan interest rate is lower the lowest interest rate of your credit card, using it to repay your debts isn’t worth it from a financial standpoint.

Several factors come into play when you make the decision to repay your credit card debt using a loan. You must evaluate each of these factors according to your situation to make the best decision.

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