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The debt collection process

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How it works, when you can be contacted and what you can do about it.

If you’re behind on your monthly payments for a loan, credit card or utility bill, a debt collector may get in contact with you about it. While dealing with an overdue debt can be overwhelming, it’s usually easier to manage when you understand the process.

When will a debt collector contact me?

Every credit provider has a different policy when it comes to overdue debts and debt collection. But generally, if you’re late with a payment, you won’t hear from a debt collector straight away. Instead, your provider may contact you by phone, email or letter reminding you of the debt and requesting payment.

If you haven’t responded to your provider or made a payment, they may then refer the account to a debt collector. This could be the case if you have a payment that’s more than 30 days overdue. It’s even more likely that you’ll hear from a debt collector when your account is “in default,” which usually takes a little longer.

Different types of debt collectors

Some providers and banks have their own, internal debt collection teams to help with overdue accounts. Others may pass the debts on to third-party debt collection companies (which is more common for larger debts that have been in default for several months). Whatever the case, you should be able to discuss a range of options for dealing with the debt in a way that’s manageable for you.

How will debt collectors contact me?

The most common way for debt collectors to contact you is via phone. However, they can also contact you by letter, in person or online through email. They can’t contact you before 8 a.m. or after 9 p.m. They’re also prohibited from repeatedly calling to annoy you, though the law doesn’t specify a number of times they’re allowed to call before it’s considered harassment.

Debt collectors are also advised to respect any reasonable requests you have for contact within specific hours and they can’t call you at work if you request or continue to call at all if you send in a letter requesting they stop. If you think a debt collector is contacting you too often, or not giving you an opportunity to respond, you can contact the company to complain or contact the Consumer Financial Protection Bureau.

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Debt collectors and privacy

As well as recommendations around how often a debt collector can contact you, there are also regulations and requirements that help protect your right to privacy. For example, a debt collector is not allowed to give anyone else details about your financial situation or to reveal that they are a debt collector unless you give them permission to do so.

This means if a debt collector contacts you at home or work and you’re not there, they can’t tell anyone else about the situation. Similarly, if they contact you online, they have to be reasonably sure that no one else will see the information.

What can I do when debt collectors get involved?

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If a debt collector contacts you, it’s ideal to respond to them as soon as possible so that you can deal with the overdue account. Depending on your circumstances, you may be able to consider some of the following options:

  • Keep a record of the contact. Take note of when a debt collector has contacted you and what they said. This will help protect your right to privacy and may be used as evidence if you have to lodge a complaint.
  • Explain your situation. Let the debt collector know why you haven’t made a payment. If you’re experiencing financial hardship, they may be able to offer you a payment plan without taking further action.
  • Work out how much you can afford to pay. Debt collectors may suggest a repayment plan for you based on the amount that you owe. When that’s the case, make sure you can afford the repayments based on your current circumstances. If you can’t, suggest an amount that would be reasonable for you or ask about other options.
  • Get professional advice. If you’re unsure of how to deal with your debt, consider getting professional advice. You can often get free or low-cost help from a credit union, religious organization or nonprofit agency.

What if I'm contacted about a debt I don't owe?

If a debt collector has contacted you about a debt that you don’t think is yours, or if the amount of debt seems wrong, send a letter to ask for validation of the debt. Check these details against your own and then contact the provider to dispute the debt.

If necessary, provide copies of any additional details, such as payments you’ve made that aren’t recorded on your account. If the situation still isn’t resolved, you can seek professional advice from a nonprofit group, hire a lawyer or file a complaint the the Consumer Financial Protection Bureau if you feel that the collector is harassing you.

Bottom line

Dealing with overdue debts can be overwhelming, but there are many ways to get back on track. Understanding how the process works and being proactive by getting in touch with any debt collectors can help you take back control of your finances. However, if your debt situation worsens to a point where you no longer think you can handle it on your own, consider using a debt relief company to help you regain control of your finances.

Frequently asked questions

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