- Debt collection agencies work on behalf of creditors to get you to pay.
- Debt collector agencies send letters and make calls. They are not allowed to harass you.
- Learn how to negotiate with debt collectors and don't ignore lawsuits.
Ignoring or missing payments on a credit card or medical bill doesn't make the debt magically disappear. Instead, expect a collection agency to send a letter or make a collection call. Dealing with debt is stressful, and threats and pressures from a debt collector aren't going to make your life easier.
Be prepared and arm yourself with the best information to deal with a collection agency.
What's inside this article
- What is a collection agency?
- Major debt collection agencies
- Validate your debt
- Is it an old debt?
- Negotiate your debt
- How to deal with harassment
- How to deal with a lawsuit
- Fixing your credit report
What is a collection agency? How does it work?
Collection agencies are private companies that attempt to collect on delinquent bills and debts. The types of debt vary and can include loans, medical bills, credit cards, utility bills, and cell phone bills. Parents can even hire collection agencies to collect delinquent child support.
Most creditors report debtor payments to credit reporting agencies (CRAs). Overdue payments show up as delinquent between 30-60 days after their due date. Usually, after that time, creditors start to move the debt through a collection process.
Some creditors have in-house collection departments, while others turn delinquent debt over the debt to a third party debt collection agency. Sometimes this third party acts as a middleman for the original creditor. Creditors pay it a fee for debt collection services.
Then, there are debt buyers – they buy past-due balances for pennies on the dollar and aggressively attempt to collect the debt either through debt negotiations or a lawsuit. Any money they collect stays in their pocket.
Spam emails and phone calls are widespread, with scammers trying to get your personal information. Whenever a debt collector contacts you, do not give out sensitive information. Identify the caller and make sure the company has a valid collection agency license. Ask for their name, the name of the company, and why they are contacting you.
Debt collection agencies
Are you getting a call or letter from a collection agency? Learn more about them. Here is a list of top debt collection agencies covered by Bills.com:
- Alltran Financial
- ARS National Services
- Avante USA
- Capital Management Services
- Cavalry Portfolio Services
- CKS Financial
- Client Services, Inc.
- Convergent Outsourcing
- Credit Control LLC
- Credit Corp Solutions
- Glasser and Glasser
- Glass Mountain Capital
- Gurstel Law Firm
- Javitch Block
- Jefferson Capital Management
- Midland Credit Management
- MRS Associates
- National Enterprise Systems
- Nationwide Credit Inc
- NCB Management
- Northstar Location Services
- Portfolio Recovery Associates
- Radius Global Solutions
- Rausch Sturm
- Real Time Resolutions
- Resurgent Capital Services
- Velocity Investments LLC
- Weltman Weinberg & Reis
- Zwicker Associates
Do you owe the debt collection agency money? Validate your debt
In most cases, you probably owe money to the collection agency. However, since you didn't borrow money or receive a service from them, you probably won't recognize their name.
Federal and state laws regulate collection agencies and how third party debt collectors can operate. The federal law that applies to third party agencies does not govern original creditors, but they must also follow certain debt collection rules when attempting to collect from a debtor. One of their obligations is to verify that the debt is authentic.
The first thing that you need to do is validate the debt. Once contacted by a debt collector, you have thirty days to ask for verification. Send a debt validation letter through registered mail. Check the bills.com page for a sample letter. The debt collector must cease collection activities until they send you a copy of the verification. Their letter should include:
- The name and address of the original creditor.
- A statement from the original creditor that the debt is valid.
- The amount of the original debt.
- Copies of judgments (if any).
If the agency fails to comply, then send them a notice of insufficient validation. Although the burden of proof is limited, if they don't validate your debt, the agency has no legal basis for collecting it.
Is it an old debt? Check the statute of limitations
The age of the debt makes a difference. If it is an old debt, it might limit the options available to the collection agency and increase your negotiating power. You want to be careful about re-aging the debt. Creditors have the right to call, send letters, and try to persuade you to pay. However, if the statute of limitations (SOL) expired, only the original creditors can sue. Once expired, a third-party creditor that bought your debt is not allowed to sue.
When dealing with a collection agency, be careful not to re-age a debt. Don't make a voluntary payment or acknowledge the debt.
Statutes of limitations are tricky. State laws set a time limit for debt collections. For example, the California statute of limitations for credit card debt is four years, and in New York, six years. However, it is still possible for some creditors to sue you even if the time has expired. Sometimes it is hard to determine the actual age of the debt and the existing law that covers the debt. The collector may have a different take on the expiration date and pursue a lawsuit against you.
Negotiating with a debt collection agency
Most agencies buy collection accounts for 1 to 10 cents on the dollar. Even ones that act as agents for the original creditors want to close an account as quickly as possible. They contact you through emails and phone calls and apply pressure tactics to get you to pay as much as possible. Since most consumers fall behind on payments due to hardship, almost all collection agencies are willing to reach an agreement.
Your first option is to try to negotiate a settlement with them. Debt negotiation is a skill and requires a significant amount of time and effort. Here are three tips:
- Be calm, clear, and convincing.
- Be persistent.
- Send a debt negotiation letter.
If you have a large debt (or debts), consider using a professional debt negotiation company. For example, Freedom Debt Relief, a top debt settlement company, has years of experience dealing with both original creditors and collection agencies. They rely on databases of past settlements, so their negotiators know what range original creditors and collection agencies have accepted for payments in the past. With their large teams and digital systems, they can reach a negotiated settlement with your debt collection agency quickly.
How to deal with debt collection agency harassment?
Third party debt collectors and debt buyers can be extremely aggressive in their collection tactics. Even those with a collection agency license. Collection agencies are strictly regulated by The Fair Debt Collection Practices Act (FDCPA).
Here are some of the actions that they are forbidden to do:
- Use the Telephone to Annoy or Harass
- Threaten Arrest
- Use Abusive or Threatening Language
- Contact a relative, friend, or colleague who does not own the debt
- Call at an unreasonable time such as before 8:00 AM or after 9:00 PM
- Contact a Consumer at Work
- Seek Unjustifiable Amounts
Avoid future contact by sending a cease and desist letter to the collection agency.
If you think that your rights were violated under the FDCPA file a complaint with the CFPB, the BBB, or your state attorney general. Also, consult with a consumer rights attorney in your area. Discuss possibly filing a lawsuit against the collection agency; not only could it result in the cancellation of your debt, but you could be awarded damages.
How to deal with a lawsuit from a collection agency
If your debt is in collections and the creditor feels that you have the means to pay, then they may pursue a lawsuit against you. If they succeed, then they will pursue all legal remedies, including wage garnishments, bank levies, and liens on personal property.
The debt collector can not make idle threats to sue you: However, if they are planning on suing you, they can mention that in a call. If the agency feels that you have the means to pay or disregard their attempts to collect, they often file lawsuits against you. A frequent tactic is to file a lawsuit just before the statute of limitations expires. Once they get a judgment, they can continue to attempt to collect.
If a collection agency files a lawsuit against you, consult with a lawyer in your state with consumer law experience. You must file an answer to their summons and complaint or risk losing the lawsuit by default.
How to deal with a collection agency on your credit report?
Negative tradelines stay on your credit report for seven years from the delinquency date. Bankruptcies remain for ten years, and judgments can stay for even longer if the creditor renews them.
Inaccurate items appear for many reasons, including clerical errors and identity theft. Suppose you see an incorrect item with the name of an unfamiliar collection agency or a company. In that case, it is possible to file a dispute with the Credit Reporting Agencies. Most agencies like Experian, TransUnion, and Equifax have online dispute forms.