By Casey Bond / Updated: Oct 22, 2019

Guide On How To Handle Debt Collection

Guide to Debt Collectors

Dealing with debt collection can be pretty frustrating. Not only are you trying to manage your debt obligations, but you also have to suffer phone calls at home chasing money you owe. The main thing to remember is that you should not let these debt collection agencies intimidate you.

Staying calm and focused while trying to work out an amenable agreement is the best way to reach a satisfactory outcome. Knowing how these companies work will give you a better chance of negotiating with them.

Dealing with Debtor Accounts

Collection agencies can get their accounts a couple of ways. The first way is that a creditor hires a debt collector to chase past due accounts. The collection agency, in this instant, works under the rules of the creditor and reports back to them. Payment is made on a commission basis, a salary basis, or a combination of both.


If you consider the first example, then you can understand that there isn’t a lot of negotiating room with the collector. They are just following the rules. If you have problems, it’s best to call the creditor directly.

Some areas of negotiation can be:

  • Authorisation to make delayed payments;
  • Make reduced payments;
  • Ask for a lower interest rate;
  • Or anything that both you and the creditor find acceptable;
  • There’s a possibility of a complete restructuring of the loan.

If you can convince the creditor that you are serious about fixing the problem, you’re well on the way to relief from collection agencies. The creditor is more than likely going to deal with you directly and take back ownership of your loan file.

Dealing with the Debt Collection Agency

The other way a collection agency can get the accounts is by purchasing the debt from the creditor. When this happens, the company owns the debt, and they operate under their own set of rules when collecting outstanding monies.

If the collection agency owns the debt, then you can negotiate with them directly. They will be more than willing to work out some deal with you. They have control over the debt. It’s a fact that they probably bought your debt for peanuts anyway, so they have a good reason to chase the money. They don’t have to get as much from you to turn a profit on the debt purchase.

An example would be that if you initially owed $10,000, the collection agency might have purchased that debt for $3,000. An offer of $4,000 is a reasonable one, and they may be willing to accept that. They realize it’s going to cost them a lot more if they have to keep trying to collect the full amount. Every case is different, but remember that there is always room for sensible negotiations.

7 Things To Know When Dealing with a Debt Collector

1. Read the Fair Credit Reporting Act

It is true that a debt collector has a right to collect what is owed, but they must follow the rules laid down in the Fair Debt Collection Practices Act (FDCPA). You have rights too. There is no room for abusive behavior. The FDCPA prohibits this kind of conduct as it’s not legal. The Act was created to stop this type of debt collector harassment. If this occurs, make sure you record the behavior. You can then file a formal complaint to the Federal Trade Commission. The complaint can be in a letter you write yourself, or you can request a form.

2. Your Terms, Not Theirs

Work out what you can afford and pay a realistic amount. It will mean an in-depth review of your income and expenses. Something you should have considered doing earlier, no doubt.

How to Handle Debt Collection

By the time your debt has reached the third party, it’s the last step before being written off. By agreeing to a payment plan, it will probably cost you more over time. Avoid doing this. If you do decide to repay, make sure you know precisely the total amount you will pay.

3. Zombie Debts – a Debt That Just Won’t Die

Debt accounts are resold, and you can get a call about a debt that is either no longer owed or is outside the statute of limitations. The status of limitations applies to the period available to the creditor to sue you for the debt. It doesn’t mean they won’t stop trying. Make sure the collector validates the debt before you agree that it actually exists.

If you make a payment on an old debt or even admit that you owe the amount, you are virtually restarting the clock. Due diligence on a Zombie debt is to check your credit report and see if that debt appears anywhere. Try to do all you can to have that debt removed from your report.

4. Watch out for Scammers

If a debt collector knocks on your door, make sure they identify themselves with their name, company, street address, telephone number and if you live in a state that licenses debt collectors, get the license number. It’s worth checking out the Consumer Financial Protection Bureau (CFPB) website which has a few more tips that will help you spot a fraud.

5. Don’t Fall for “Just Pay Something” Suggestion

Once you do that, even over the phone, that debt clock starts again, and the debt appears on your credit report. If they want money, then tell them to send the request to you in writing.

Here’s a tip: the debt collection agency must investigate a filed dispute submitted by you in writing within 30 days. There must be no contact with them until they verify the debt, in writing.

6. The Number of Calls

There are time limits on when a debt collector can call. Not before 8 am and not after 9 pm. They cannot call too many times during the day, and they cannot call you at work if you tell them to stop. There must not be abusive language. You can, in fact, ask them to stop calling you altogether. According to the FDCPA, it’s your right. They cannot call you if you send them a letter requesting they do so. Keep a copy of the letter and make sure you send the original by certified mail. The letter doesn’t pay your debt, but it certainly stops the never-ending phone calls.

7. The Debt Collector Cannot Increase the Amount Owed

The debt collector can charge interest but only the original amount in your contract with the original creditor. Recheck your state laws because some states place a limit on the amount of interest and fees that can be charged.

Nobody likes to be in debt, but you have rights, as does the collector. These rights make sure you are not tied mercilessly to your debt. You have better control of your situation if you know and exercise your rights.

Works Cited

1 Crediful “How to Deal with Debt Collection Agencies”

2 CreditCards “10 tips for dealing with debt collectors, collection”

3 Forbes “7 Steps in Dealing With Debt Collectors”

4 ConsumerAffairs “How to handle bill collectors. Know your rights when a debt collector calls”

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