Getting Collection Agencies To Settle For Less

Trying to collect payment on debts sent to collection can quickly become counterproductive because of the costs involved. Once the costs start adding up, collection agencies who initially insisted on full payment, quickly become more open to negotiation – especially since the alternative is to simply write off the debt When this happens, you may be in a position to bargain for a lower payoff on your debt.

Collection agencies are often satisfied to settle your debt for whatever you can offer them. The reason being, they usually only get to keep a percentage of what’s collected. To maximize their overall return, they need to collect as much as they can, as fast as they can. Since their motivation is to get matters settled as quickly as possible, negotiating a lump sum payment, rather than installments, will go over much better.

With these facts in mind, see if the collection agency would be willing to accept a lesser amount to settle your debt – offer about 40% of your original debt initially. While this is just a starting point and the collection agency will always try to get more, showing a willingness to negotiate should get you to a number somewhere in the middle. Your bargaining power is greatest when in negotiation, so include removal of the related negative data from your credit report in your negotiations, maybe offering a slightly higher payoff in exchange.

Whether it be a lump sum or a series of payments, only offer what you can actually afford. You need this matter to be put to rest as much as the collection agency, and you don’t need to further exacerbate your financial problems. Also, keep the source of your funds confidential. Collectors push for higher payoffs if they believe you have friends or family willing to help you out.

Once you’ve reached an agreement, get everything in writing. Be sure to include the stipulation about removing the negative data from your credit report and that your entire debt be retired in exchange for the settled upon amount. Use either a cashier’s check or money order to issue payment (they won’t take your check!). If your only alternative is to use cash, be sure to get a receipt. Plan to retain all related documents at least four years.

Knowing how collection agencies are motivated can put you in the driver’s seat when trying to settle your debts. That knowledge and a little initiative can help you negotiate a debt settlement that’s better than you expected. Effectively leveraging your bargaining power at the right time can benefit both your wallet and your credit score.

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Know Your Rights When Dealing With Collection Agencies

Collection agencies frequently engage in illegal or deceptive practices when trying to collect debts. However, you don’t have to be a victim of their tactics, if you know your federally protected rights. Taking action against such violations could even result in forgiveness of your debt. Collection agencies who don’t follow the law can see fines and court fees levied against them as well as lose their license.

Individuals facing collection proceeding have federally protected rights under the Fair Debt Collections Practices Act (FDCPA). Some of the specific provisions provided include:

Torment or Abuse

A collection agent cannot use or threaten to use force against you, your property, or another member of your family. They are also prohibited from calling you repeatedly, not identifying themselves, listing you on a “deadbeat” list, or listing your property for sale.

Contact with You

Collection agents are only allowed to contact you during reasonable hours. That usually means around 8am to 9pm, unless you tell them that’s not convenient. They cannot contact you at work if your boss doesn’t allow it. In addition, all contact must stop at your request, unless to tell you your case has either been settled, or they are filing suit.

Third Party Communication

Collection agencies are not allowed to talk to outside third parties about any aspects of your case. The exception is when they are trying to find out where you are. Then they can only ask your whereabouts and give their name. No mention of your debts or their employer can be given out. The third party cannot be contacted again unless they give permission or the agency has reason to believe they were given incomplete or false information.

All communications must go through your attorney, if you have retained one. This is true unless you have given permission for the collection agency to contact you or your attorney does not respond to their attempts. They are also allowed to contact your spouse, or parents if you are a minor, unless you have asked in writing for them not to. Even though it’s common, they are not allowed to harass your parents or your adult children to try to get you to pay.

Deceptive Practices

Collection agents are not allowed to pretend to be a law enforcement officer, government official, or any other entity in their attempts to get your cooperation. They also cannot falsely represent the amount you owe, the legal status of your debt, or threaten legal action they do not actually intend to take. Sending you documentation intended to appear it’s from a lawyer is also prohibited.

Unjust Practices

Consumers are protected from crooked, unfair, and unreasonable tactics employed by collection. Some commonly employed include causing you to incur expenses due to their collection efforts, adding interest and fees to what you owe, and depositing post dated check prior to the date without permission. You also cannot be threatened with criminal prosecution for nonpayment.

Your Options

If you have been victim of any of these types of harassment or abuse, you need to complain to the original creditor, the Federal Trade Commission, and your state Attorney General. You could have your whole debt forgiven by your original creditor in some circumstances, as they can be held liable.

You can sue a collection agency for harassment and for violation of the FDCPA. You could be entitled to actual damages, plus pain and suffering. The collector could also be assessed punitive damages for especially egregious offenses. It will most likely require both a witness and documentation of ongoing abusive behavior for you to win your case.

Let the law back you up when you are brought face-to-face with a debt collector. Knowing your rights can help you keep their tactics within the law.

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