Debt Collectors Archives - The Free Financial Advisor

When debt is sold to a collection agency, it’s incredibly common to get upset and/or worried. Odds are, you’ll start getting calls, emails, and text messages about you paying what’s owed.

In today’s post, we’ll discuss what leads to debt going to collections, what to do, what the collections agency can do, and what happens to your credit.

Why does debt go to collections?

Debt goes into collections when you’re behind a certain period of time (usually 30+ days) on your payment.

The lender will either use their own debt collectors or hire a third party to collect. What might also happen is your debt is sold to a collection agency, where they buy the debt from the lender (at a reduced amount than what you actually owe) and then attempt to collect on that amount.

Mortgages

With regard to mortgages, there are certain time periods to keep in mind:

1 – 15 days – Typical grace period. Your payment must be paid in this period.
16 30 days – You’ll start getting reminders, and you’ll likely pay a small late fee. No damage to your credit.
31 – 59 days – Reminder calls and letters will increase. Your credit will reflect your current late status and your credit score will fall.
60 – 90 days – The reminder calls and letters will stop. Someone from your lender will come to your house.

What to do when your debt is sold to a collection agency

Don’t ignore it. The best thing you can do is get ahead of it. Gather information about the debt in question. Have them send it to you in writing.

Contact the creditor. Dispute it if you believe there are inaccuracies, or if it’s just not your debt. If it is your debt and everything is accurate, try to negotiate with the lender – they prefer to receive some of what you owe!

If the collection agency is harassing you, submit a request in writing for them to stop.

What if you’re at your wit’s end and don’t know what to do? Hire an attorney. All correspondence, going forward, has to go through them. If anything, get a consultation from an attorney (which is often offered for free) and see what they recommend.

What can they do?

When it comes to collections and the law, there are a few things they can do and several things they can’t do. If you want to know more about that, click here.

Your credit

There are two important things to know when it comes to collections and your credit report.

A collection (or a charge off) hurts your credit score. Not only that, but your payment history (number one factor when calculating your score) will no longer be 100%, and that’s damaging as well.
A collection will stay on your credit report for 7 years. You can implement strategies to improve your score, but you’ll only be able to do so much while that collection is on there.

Having a debt sold to a collection agency isn’t the end of the world. There are several things you can do to rectify it, dispute, or recover from it.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is the law that governs what third-party debt collectors can and can’t do.

Things they can’t do include calling before 8 am and after 9 pm based on your time zone, call you at work, harass, oppress, or abuse you, lie to you, threaten you with jail time, conceal their identity, disregarding a written request from you to cease contact or dispute a debt.

Debt collectors also can’t reveal any personal information about your debt to people, except your spouse or your guardian (if you’re a minor).

Mail correspondence can’t show that the mailer is from a debt collector. Also, if you hire an attorney and the collector has your attorney’s contact information, they must correspond with your legal counsel, not you.

If the aggressive debt collector violates any of the parameters set by the FDCPA, you have one year from the date of the violation to file a complaint. You can do that by using the online form, here, or by calling (855) 411-2372.

Take notes

If it ever gets to the point where you file a complaint or sue the aggressive debt collector, copious notes will help you make your case.

Get as many details as possible. Time, date, name of the collector, the agency they work for, the debt they are calling about, etc.

Hang up or don’t answer

If the call is from a number you don’t recognize, don’t answer. If the call was important, they’ll leave a message.

Typically, debt collectors are dialing for dollars (calling A LOT), so they typically won’t leave messages. If they do, listen to it and do your research to confirm if it’s legit or not.

In a lot of cases, consumers don’t know what they’re rights are. Even though collectors must abide by the laws set forth in the FDCPA, they might not if they think they’re speaking with an uninformed individual.

If they start badgering you, use aggressive language, or violate the law in any other manner, just hang up the phone.

Write a letter

You can write a letter to a debt collector for two reasons.

One, asking them to stop. They HAVE to stop if you put it in writing. Two, dispute the debt. If you believe that the debt they are trying to collect is fraudulent or not yours, write a letter to dispute it.

Cool heads prevail

Debt collectors are ruthless. Their objective is to get as much out of you as possible before they sell the remaining portion of your debt to the next collector in line.

It’s human nature to get worked up or downright pissed off in this situation, but getting angry won’t help you.

Collectors have been conditioned to withstand a verbal thrashing from consumers. Staying calm will keep your blood pressure down and help you think straight.

What Happens if Debt Is Sold to a Collection Agency?