According to the Consumer Financial Protection Bureau, 25% of Americans had a debt in collections in 2018. You would think that debt collectors might give consumers a break during a pandemic, but sadly that’s not the case. There are temporary measures that prevent lenders from going after current debts, but protections do not cover existing ones. In some cases, collectors have even tried to take the government-issued stimulus checks. It’s deplorable but all too predictable.
Despite the prevalence of debt collection agencies, many people don’t have a real grasp on their daily operations. They use people’s ignorance to their advantage, preying on vulnerability. Even if they have legitimate reason to collect debt, they’re still known to resort to shady tactics. Read below for key information to protect yourself from their deception.
Who are these debt collectors exactly?
There are approximately 7,800 collection agencies in America. They collect $12.7 billion every year. There are smaller agencies but the field is primarily dominated by larger firms like Encore Capital Group, PRA Group, and others.
They have different revenue models. A collector can keep anywhere between 7-50% of any debt that a lender hasn’t charged off. From that point on, there are various approaches. Some collectors work on a contingency basis, retaining 50-80% of what they’ve collected. Other firms, including some of the larger players, buy the debt outright and keep all of what they recover.
They’ll go to any length to get you to pay up.
There are lots of things a collector can do to get you to pay, like calling during convenient times or even talking to your spouse. However, they’re not afraid of crossing the line and resorting to unethical practices: threats, harassment, late-night calls, forgoing the proper paperwork, just to name a few. One of the best ways to protect yourself from shady tactics is to equip yourself with information. Read more about common debt scams here.
What should I do if a collection agency calls?
1. Ask for the proper paperwork.
Under federal law, you have 30 days after a debt collector calls to dispute the debt or inquire for more information. If you request additional information, the collector should send you an itemization of the original debt along with any interest and fees.
2. Verify the date.
A collector cannot come after you if a set statute of limitations has expired. The specific time limit depends on your state’s laws and, in some cases, the type of debt.
3. Request silence.
These collectors want to intimidate you. Even if you owe the debt, you have a right to ask for no future contact through a formal cease-and-desist letter.
4. Clear the official record.
After you’ve paid off the debt, you deserve a clear record. Demand a written statement confirming that your obligation has been settled. Then, verify that your credit report reflects these changes.
Explore a long-term solution.
There are ways to negotiate with collectors and sort out payment plans, but you may be doing yourself a disservice. Serious debt does not resolve itself. Bankruptcy is the solution, not the problem.