How to Negotiate With Debt Collectors (and Why You Should Always Do It)
There is no shortage of scammers who pretend to be debt collectors and harass you with calls and text messages day after day. If you block these numbers, you need to be sure that it is indeed a scam and that you are not ignoring legitimate debt collectors ( who can find you on social media, by the way).
Calls from legitimate debt collectors mean that your original creditor, such as a bank or hospital, has sent your bill to a collection agency to collect the debt. However, you may be surprised at the willingness of many agents to accept partial payment or a suggested repayment plan. Here’s how you can negotiate your debt when a collection agency contacts you.
Don’t ignore debt collectors
With all the robocalls terrorizing us these days, it’s natural to let the majority of unknown numbers rot in your voicemail inbox. However, if it is a legitimate collector, it is not recommended to simply ignore the call. Before you take or call them back, be sure to review your rights under the Fair Debt Collection Practices Act, outlined below.
Know Your Rights Under the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) restricts debt collectors from collecting certain types of debt, including auto loans, credit cards, medical, mortgage, and some others. Some states have additional laws. Also, legitimate debt collectors cannot threaten or harass you. Brush up on all your rights when it comes to debt collectors so you can protect yourself from phone scams or compromising disclosures.
It is important to note that collectors must provide the following key details: the name of the lender, the amount you owe, the name and address of the original loan you can request, and the fact that you can dispute the debt.
Learn about debt
Use your rights listed above to collect all the information you need about your debt. You want to know who you owe money to and how much you supposedly owe them. If you decide to dispute the debt, the debt collector must check it. If you file a written objection within 30 days of receipt of the confirmation notice, the collector may not contact you again until it sends you written confirmation of the debt.
Make sure you ask for all the information you need to develop a negotiation plan. As we mentioned above, the agent may decide to accept your partial payment offer rather than go through the long and torturous collection process.
What not to say to collectors
Even if you are almost sure that you have a debt declared by a collection agency, do not confirm it yet. According to US News , verbal acknowledgment can confirm a debt or extend the statute of limitations for collection.
If it’s an old debt (say, more than three to six years old), don’t make the payment until you’ve talked to a lawyer. You may be outside of your state’s statute of limitations on a debt.
Develop a negotiation plan
Once you confirm that the debt is legitimate, it’s time to discuss a payment plan that’s right for you. This conversation with the debt collector may be more fruitful than any initial negotiations you attempted with the original creditor. The Consumer Financial Protection Bureau (CFPB) outlines two main ways to settle your debt:
Partial repayment. Although debt collectors may demand the full amount of the debt, in some cases they will be willing to accept a smaller amount. Explain your financial situation and start negotiations small. The CFPB suggests starting by offering cents for every dollar you owe, say 20 to 25 cents, then 50 cents for every dollar, then 75.
Payment plan. Review your monthly budget and debt priorities. Falling behind other accounts to prioritize this debt could lead to bigger problems down the road. If the payment terms from the original lender were unmanageable for your financial situation, you may be able to negotiate a lower monthly amount with the collector. Determine how much money you can reasonably put into regular debt payments.
Keep track of everything
When you come to an agreement on a repayment plan or settlement, get everything in writing . Get clear documentation that the debt will be accepted at a lower rate and will be listed as “paid in full” or “paid as agreed”. Otherwise, the collection agency may refuse verbal promises to stop collecting debts or try to re-negotiate the amount owed in the future. Do not make payment until you have a written record of the agreement.
Then, after your debt is paid off, get written confirmation that you have paid off your debt. The last thing you want is an already paid debt that pops up in front of another agency calling for collection.
bottom line
It is important that you know your rights to first check the debt and then dispute it to the best of your ability. You may be surprised at the collection agency’s willingness to negotiate your debt, up to a partial repayment or a more manageable repayment plan.
Two final reminders: Be wary of third party companies that claim to have settled your debts for you and are trying to charge you for it. This could be another scam to add to your plate. Secondly, this fact may make you skeptical about calls from collectors. This does not mean that you have to pay the original creditor directly. US News explains that by the time collectors contact you, they will be responsible for the debt and it is in your best interest to negotiate directly with them.
If you are being harassed by a debt collector, you can file a complaint with the CFPB online or at 855-411-2372, and with the Federal Trade Commission online or at 877-382-4357. You can also report themto your state’s attorney general .