You can deal with debt collectors when you can’t pay by contacting the Consumer Financial Protection Bureau, working with a credit counseling organization, or taking out a loan. Dealing with a debt collection agency is critical, even if you can’t pay. Ignoring collectors will only result in even more financial issues.
Approximately 30 million Americans have at least one outstanding debt in collections.1 Keep reading to learn more about debt collectors and how you can avoid negatively impacting your credit report.
What Is a Debt Collector?
Wondering how a debt collector works? A debt collector can be a collection company or lawyer that collects unpaid debts under the authority of the federal Fair Debt Collection Practices Act (FDCPA). Various businesses hire collectors to efficiently collect unpaid debts and reduce legal costs.
You can expect contact from a collections agency for any of the following bills:
- Late medical bills
- Missed payments for title loans
- An unpaid cosigner loan
- A delinquent variable rate loan
- Past due child support
Debt collectors typically establish contact by calling your phone or mailing you a debt verification letter. Federal law requires collection agencies to provide a verification letter if you ask for one. This letter contains information on the original creditor and your unpaid debt. To protect yourself, ensure you keep track of all communication.
Suppose a debt collector fails to provide a verification letter after you have requested one. In that case, they are in violation of the FDCPA, and you may report them. Contact your state attorney general’s office, the Federal Trade Commission (FTC), or the Consumer Financial Protection Bureau (CFPB) to issue a report. You have grounds to sue the collection agency, and if you pursue legal action, you may win up to $1,000.
If a debt collector contacts you, don’t panic just yet. It’s possible you may not even have an unpaid debt. According to the Federal Trade Commission (FTC), about 49% of debt collector complaints were about incorrect debts. Carefully review your verification letter for errors.
Debt collectors use various tactics to collect unpaid medical bills and credit card debts. You may not even be the intended target! Collectors tend to call friends and family of the individual with outstanding debt to provide contact information.
What if I Am Harassed by a Debt Collector?
There are various types of harassment. Here are a few examples:
- Abusive or profane language
- Repetitious phone calls
- Violent Threats
- Deceptive practices
- Threats of arrest
Suppose a debt collector is harassing you. In that case, you can contact your state’s attorney general or the Consumer Financial Protection Bureau (CFPB). You submit a claim online or by calling (855) 411-CFPB (2372).
If you want to take legal action, you may sue the debt collector for FDCPA violations. Suppose you win a lawsuit against a debt collector. In that case, the organization may pay your lawyer’s fees in addition to the civil action compensation.
How To Verify if a Debt Collector Is Legitimate?
Do not pay right away if you receive a call or letter from a debt buyer! There are scams to be wary of. It’s essential to first verify you are dealing with a legitimate debt collector.
These are steps you can take to verify if a repossession agent is legitimate:
| Step | Action | Details |
| 1. Request Identification | Ask for official identification | Request the agent’s name, company name, and any identification number. Legitimate agents should have no issue providing this. |
| 2. Verify Company Credentials | Research the company | Look up the company online to ensure it’s a legitimate business. Check for a professional website, contact information, and customer reviews. |
| 3. Ask for Debt Details | Request specific information about the debt | A legitimate agent should be able to provide detailed information about the debt, including the original creditor, the amount owed, and the account number. |
| 4. Request Documentation | Ask for a written notice | Legitimate repossession agents must provide a written notice of repossession, which includes details about the debt and your rights as a debtor. |
| 5. Check Licensing | Verify if they are licensed | Depending on your location, repossession agents may be required to have a license. Check with your local regulatory body or government agency. |
| 6. Be Wary of Payment Demands | Avoid immediate payment | Be cautious if the agent demands immediate payment, especially if they ask for payment in cash or via untraceable methods like wire transfers. |
| 7. Contact Original Creditor | Confirm the repossession with the creditor | Contact the original creditor to confirm that they have authorized the repossession and that the agent is working on their behalf. |
| 8. Know Your Rights | Understand your legal rights | Familiarize yourself with your rights regarding debt collection and repossession. This can help you identify if an agent is using illegal tactics or making false claims. |
If you suspect calls from a debt collector are fraudulent, end the call and stop speaking with the caller. You may submit a complaint to the Consumer Financial Protection Bureau (CFPB) or contact your state’s attorney general.
What if You Ignore a Debt Collection Company?
Dealing with debt collectors can be overwhelming, especially when you don’t have enough money in your bank account to negotiate a payment agreement. So can you just ignore them? Yes! You can write a letter to the debt collector to request they stop contacting you about that unpaid credit card debt.
While you can cease contact with debt collectors, keep in mind that you are not freed from your debt obligations. You could still be hit with a lawsuit by the debt collection company. In addition, the agency may report your delinquent debt to the three credit bureaus.
Negative financial information will show up on your credit report and decrease your FICO score. You may get two negative accounts on your credit report, one from the creditor and one from the agency. If you actively avoid debt payment, the agency can continue to report on your financial activity for seven years.
How Do I Make a Payment to a Debt Collection Agency?
Once you have verified that the debt collector is legitimate and that the debt you owe is accurate, you can start working on a repayment plan. While some debt collection agencies offer payment plans, most do not! You will likely have to find an alternative repayment option.
Suppose you need help organizing your finances to get a debt paid. In that case, you can get financial guidance from a counselor at a credit counseling organization. If you don’t have enough money at the moment to deal with collectors, you can take out a loan to help pay off the debt in one lump sum.
These are a few financial options to deal with debt collectors:
Work With a Credit Counseling Organization
If you have reservations about paying debt collectors, consider speaking with a lawyer or a non-profit credit counseling organization. A credit counseling organization can provide financial advice and help you establish a budget to get out of debt when you’re drowning. Counselors are financially certified in debt management, budgeting, and consumer credit.
When you’re married, handling finances can be stressful because both spouses have to be on the same page. A counselor can help couples create a budget plan to balance income and multiple monthly bills. Learning to stick to a financial plan with your partner can make your life significantly less stressful.
A counselor from a credit counseling organization can provide free education materials so you can learn what it means to become financially stable if you need financial information. Check out the Financial Counseling Association of America or the National Foundation for Credit Counseling to find a credit counselor near you.
Take Out a Loan To Pay Off Debt Collectors
Using a loan to pay off a debt collector can help you preserve your credit rating and obtain an affordable repayment plan. There are plenty of loan options to choose from. Still, these financial institutions could help you get a significant amount of money:
Car Title Loan
A car title loan, also known as a pink slip loan, is obtained by using your car as collateral. A lien is put on the certificate of title during the approval process. This gives the lender temporary ownership of the car while you pay off the loan. Some lenders require possession of the car, so you may be without reliable transportation for a set period.
Most cars are worth a few thousand dollars, so you could get enough money to pay off debt collectors. A good credit score is not required for car title loan qualification, but the interest rates can be very high. Car title loans may seem like an excellent financial option when you’re in a pinch, but you can lose possession of your car if you fall behind on payments!
Traditional Bank Loan
A traditional bank loan can help you get a considerable loan amount and affordable rates. Unfortunately, many people do not meet the strict qualification requirements set by these financial institutions. If you do not have a high credit score, you will likely be ineligible for a loan from the bank. A good credit score is anything higher than 670 on the credit scoring model.
If you need money as soon as possible to pay off debt collectors, you may not receive it in time. Even if you qualify for a traditional bank loan, the approval process can take a few days. The verification process is comprehensive, so you may be forced to wait for your money to be sent to your checking account. If your debt is due tomorrow, you may simply be out of luck with bank loans.
Personal Installment Loan
A personal loan is a great option if you want an affordable repayment plan to pay debt collectors. There are different types of personal loans to choose from, depending on your financial needs and repayment preferences. For example, with no credit check loans, guaranteed approval is possible at the expense of high interest rates.
The interest rates for personal loans are based on your credit score. If you have a low credit score, know that the interest rate you qualify to receive may still be more affordable than other fast cash options. Eligible borrowers may also choose the amount of time they want to pay off the loan. The repayment length may be a few months or a few years, depending on your financial situation.
FAQs About Debt Buyers
Curious about what happens during the debt buyer process? It typically starts with the original creditor attempting to collect the debt, followed by possibly transferring or selling the debt to a collection agency if unpaid. Understanding each step can help you navigate the process more confidently.
Wondering about the impact on your credit report? When a debt goes into collections, it’s reported to credit bureaus and can significantly affect your credit score. It’s important to address these issues promptly to minimize long-term credit damage.
Facing a lawsuit can be daunting, but it’s crucial to respond. Seek legal advice, understand your rights, and consider negotiating a settlement or payment plan. Ignoring a lawsuit can lead to a judgment against you, so it’s best to tackle it head-on.
Stay alert for red flags like requests for personal financial information, aggressive tactics, or lack of official documentation. Always verify the collector’s identity and legitimacy, and never hesitate to ask questions or request written proof of the debt.
Juggling multiple debts? Start by prioritizing them based on interest rates and amounts. Consider debt consolidation or working with a credit counselor for a manageable repayment plan. Remember, tackling one debt at a time can make the process less overwhelming.
Absolutely! Debt collectors often negotiate to settle for a lower amount than what’s owed. Be honest about your financial situation, and don’t be afraid to negotiate a payment plan or a reduced settlement that works for both parties.
The Bottom Line on Debt Collectors From CreditNinja
Dealing with debt collectors is stressful, but you have various financial options at your disposal! If you lack the money to pay a collection debt, don’t feel like your only option is to contact a bankruptcy attorney.
You could get an online loan with competitive rates when you work with CreditNinja! Our online loans come with exclusive perks and flexible payment plans. Complete our online form today to see how much you could qualify to get!
References:
- 7 Shocking Statistics About Debt Collection in the U.S. │ Direct Recovery
- What is a debt collector and why are they contacting me? │ Consumer Finance
- What is harassment by a debt collector? │ Consumer Finance
- What Is a Debt Validation Letter? │ Ramsey Solutions
- How can I verify whether or not a debt collector is legitimate? │ Consumer Finance
- What is credit counseling? │ Consumer Finance
