The Top 10 Things You Need to Know When Dealing with a Debt Collector

The Top 10 Things You Need to Know When Dealing with a Debt Collector

The Consumer Financial Protection Bureau recently published a report on the most common consumer complaints Americans submit. Since the CFPB started accepting debt-collection complaints in July 2013, consumers have filed some 316,810 of them. The problem is that consumers don’t know what to do when a debt collector calls.  So, to remedy that here is what you need to know.

(1)  Know your Statue of Limitations period 

The statute of limitations period is the time period where a debt collector or a creditor can sue you as a means of collection of the debt.  In Texas, it is 4 1/2 years past the first missed payment that made the debt go bad.  Once you get passed that time period, the debt collector has no legal power over you.

(2)     Even Past the Statute of Limitation period you always owe the debt

You have to know that you always owe the debt. Once again, the difference is whether the debt collector has legal power over you to collect.  (see above)

(3)     The debt collector cannot do anything to harm you beyond file a lawsuit

They can’t garnish your wages (unless it is student loan debt).  They can’t take you to jail.  They can’t repossess your car unless the loan was on your car. They can’t take your house unless the loan was on your house. They can’t take your driver license. They can and they will unlawfully threaten you. However, it is only bullying designed to get you to take action.

(4)     Beware of the downside to sending a cease and desist letter

You have the right to send the debt collector a cease and desist letter alerting them that they must cease all debt collection efforts.  The downside is that you put them in a corner giving them only one way to collect – filling a lawsuit (if you are still in the statute of limitation period).  If they don’t honor your cease and desist letter and continue to collect, you have the right to sue them.

(5)     If they sell your debt it is a good sign

When a debt collector is not getting anywhere, they have the option to either file a lawsuit or give the debt back (if they are collecting for a creditor) or sell the debt (if they own it). Anytime a debt is sold, I have always thought it was a sign that the debt was not worth taking legal action over. If that is the case, wouldn’t you rather manage debt collectors than manage lawsuits?

(6)     If you get a call from a debt collector, verify that the debt is yours.

This happens all the time. Consumers get served with a debt collection letter and it is not even their debt. If that is the case, send certified mail to the debt collector telling them that in no uncertain way this debt is yours.

(7)     If you get harassed the law is on your side

The Fair Debt Collections Act states that if a consumer is harassed the consumer has the right to sue the debt collector for damages and the debt collector has to pay the consumer’s legal bills. One of the best pieces of legislation that Congress has ever written.

(8)     Your debt will probably stick with you for a lifetime

You have to manage your credit report because an old defaulted debt will more than likely get sold from debt collector to debt collector. Oftentimes, when that occurs, the debt collector will put that back on your credit report as a new debt. even though that is not true.   You have to watch your credit report and get those erroneous remarks removed from your credit report. This is one of the main reasons why you want to avoid default. It can stick with you for a lifetime.

(9)     Stay organized and keep good notes

If you find yourself in a debt collection process, take good notes.  Down the line you might need proof to get something removed from your credit report and or to make a debt collector go away.

(10)     Negotiate, Negotiate, Negotiate

The payment of debt is negotiable. A debt collector oftentimes pays pennies on the dollar for the debt. So, they have big profit margins. In addition, oftentimes they claim you owe more debt than you do after they illegally trump of the bill. You can always negotiate. Be aggressive! Also, if you reach a deal, always get them to acknowledge in writing before you make any payments.

This is not written to give you tips on how to get out of a debt. You should pay back your debts in some form. It is about making the playing field fair.

For more information on the entire process. Read Bob’s book Deceptive Money.


Subscribe to the Prudent Money E-Letter

Subscribe to the Prudent Money E-Letter

Join our mailing list to receive the latest Prudent Money news and helpful advice.

Thank you for subscribing to the Prudent Money E-Letter.