5 Ways to Handle Pushy Debt Collectors

The best way to avoid calls from debt collectors is to pay your bills on time. But if you get caught up in a collection process, know that you have rights under the law.

• If a collector calls and you don’t recognize the debt: Immediately request written proof that you owe the quoted amount, sent by certified mail with return receipt.

“If it’s a credit card debt, expect to receive a copy of your card application form — with your signature,” says former collector Michelle Dunn. “If it’s a medical debt, expect to see a statement or invoice outlining the services provided, dates and doctor’s name. Just getting a letter from the collection agency isn’t proof.”

• If you don’t want future contact: Inform the collection agency in writing, again by certified mail. By law, once a collection agency receives this cease and desist letter, it is permitted to contact you again only in two circumstances: to tell you there will be no further contact or to let you know that the collection agency or the creditor intends to take a specific action, like filing a lawsuit. Requesting “no contact” doesn’t remove the debt.

• If you owe but can’t pay: Ask for a settlement, starting at about 50 percent of the debt amount. A collection agency typically needs authorization from its client — the creditor — to do this and will get a commission ranging from 10 to 50 percent of what’s collected.
  

But other collectors buy debts up front, usually for 30 to 50 percent of its original amount, and keep all of whatever is collected. They can make deals on their own.

Some collectors will accept monthly payments, even for amounts reduced by a settlement. “If you settle, the debt shows on the credit report that you paid it,” says Dunn. “It doesn’t say you paid less than what was owed.”

• If you don’t owe: Stories abound of folks harassed to pay debts owed by people with similar names or addresses. If this happens to you, send a letter to the agency explaining the collector’s error, and noting its responsibility to do “proper due diligence” in identifying a debtor.

On your letter, signal with a “cc” that you’re filing copies to the Federal Trade Commission, Better Business Bureau, your state attorney general, your local chamber of commerce and ACA International, the collection industry’s trade association. This can help because “legitimate agencies like to brag about their memberships, and chambers and the ACA want members in good standing,” says Dunn.

• The statute of limitations: Before you pay a debt, find out if your state limits the time in which collectors can pursue or sue debtors for nonpayment. These limitations may not apply to student loans or court judgments such as an order to pay an ignored speeding ticket.
  

The National Association of Consumer Advocates can give you more information about debt collection and your rights.