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How to deal with credit card debt collectors
It's illegal for a bill collector to harass you — and you have the right to report them.
It’s a debt collector’s job to track down people with overdue debts and get them to pay, but that doesn’t mean they can try to get the money by any means necessary. Know your rights when dealing with collectors — and what to do if your rights are violated.
5 steps to dealing with credit card debt collectors
Step one: Know when debt collectors will get involved
Collection agencies usually won’t get involved straight away. In most cases, your credit card issuer will contact you after more than 60 days have passed without a debt payment.
Once that happens, the account is considered “in default” and your issuer can choose whether or not to enter the debt collection process. Some issuers may continue to directly contact you after your account is in default, but others may use a debt collector to deal with the situation.
Step two: Learn your rights, don’t accept harassment
Debt collectors will contact you to discuss your credit card debt and different payment options. The way they contact you varies but can include:
- Phone calls.
- Social media.
- In person.
Debt collectors may use one or a combination of these tactics to get in touch with you, but the US government sets legal limitations on when and how often they contact you.
The Federal Trade Commission (FTC) has a general guide to the conditions and requirements debt collectors should meet when dealing with individuals. It’s a good idea to refer to this information if you think the contact you receive is unreasonable.
Make sure you know your rights and report any violations.
Step three: Prepare for actions debt collectors can take
If written, phone or face-to-face contact doesn’t lead to an agreement between you and the debt collector or collection agency, they have two other options:
- Legal action. If you don’t pay the debt, the collector can seek a court order to garnish your wages. Depending on the state you’re in, they could take up to 25% of your disposable income if they win.
- Repossession. If your debt is significant, your lender can initiate proceedings to repossess any assets used as collateral.
Dodging debt collectors — a very bad idea
Getting a call from a debt collector can be stressful, but know that they’re not your enemy. Avoiding calls from debt collectors can lead to even more unpleasant situations and, in the end, you’ll still have to pay.
Instead, be up front. Work with the collection agency. Let them know how much you can afford to pay and be realistic about it. After all, you and the collection agency likely want things to be over as soon as reasonably possible.
Step four: Find the solution that works best for you
When you’re having trouble making credit card payments, the sooner you deal with credit card debt issues, the better chance you have of working out payment terms that fit your circumstances. Steps you can take include:
- Contact your credit card issuer.
Let your issuer know about challenges or changes in your circumstances so they can work with you to arrange a repayment plan. Many credit card issuers have support and hardship officers available to help you work through these difficulties before things get even more out of hand, so it’s important to contact them as soon as you can.
- Talk to a financial counselor.
Financial counselors can give you specialized advice based on your situation, and may also negotiate with lenders on your behalf. You can also find tips from experts online. The National Foundation for Credit Counseling website has more information about these services if you want to get in contact with someone near you.
- Consider debt settlement.
Debt relief companies help you negotiate with your lenders to settle debts for less than you owe. This might be a helpful option if you can’t afford to pay the debt.
- Seek free legal help.
There are community legal centers and free legal aid services across the US, such as Legal Services Corporation (LSC) and Legal Aid. The government’s official guide to government information and services has a list of free legal services you can access when you need support and guidance with your debts.
Step five: Follow through
The most important step you can take is to follow through on the plans you make. If an agreement is reached with a collection agency, abide by it. If you’re working with a financial adviser, stay on top of all communications with them.
Debt only grows more daunting as you ignore it, and collectors can exponentially up the ante on that feeling. Make a plan and stick to it to find your way back to financial freedom.
Could a balance transfer help?
A balance transfer allows you to move your debt from one card to another, usually with better terms. Getting a balance transfer intro APR of 0% can help you save on interest.
However, balance transfers aren’t for everyone. They often come with fees, and you may not be able to pay off the debt within the introductory period if you can’t make large enough payments.
Evaluate your debt and do the calculations to see if a balance transfer will save you money in the long run.
Compare balance transfer credit cards
Before you sign up with a debt relief company
Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And not all companies are transparent about these costs or drawbacks that can negatively affect your credit score. Depending on the company you work with, you might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.
Consider alternatives before signing up with a debt relief company:
- Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
- Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
- Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.
Your rights when dealing with debt collectors
Confrontation by a debt collector can be intimidating, so it’s important to know exactly what your rights are if they contact you. Some of the key things to keep in mind include:
Debt collectors can’t let other people know about your situation without your consent. That means they can’t reveal they’re debt collectors to anyone else connected to you in person, over the phone or on social media. In fact, if they use social media or email to contact you, they must be reasonably sure the account is private. If you believe a debt collector has violated your privacy, you can report it to the Consumer Financial Protection Bureau (CFPB).
- Reasonable communication.
Debt collectors can’t harass you with nonstop communication or late-night calls.For example, they can only call you between 8:00 a.m. and 9:00 p.m., and they can’t repeatedly call to annoy you into paying. They must obey your request to stop calling.
- Polite behavior.
Debt collectors should always treat you with respect and be polite. It’s illegal for debt collectors to intimidate, threaten or harass you, and they can’t make false statements about you, the debt you owe or how they plan to collect.
You have a right to discuss your circumstances with the debt collector and to suggest reasonable repayment terms. You also have a right to request they only speak to your attorney.
- Disputing the debt.
If you don’t believe the debt is yours, or if you disagree with the amount that is owed, you have a right to legally dispute it. The CFPB has detailed information on the different ways you can dispute debts based on your circumstances.
You have a right, at any time, to seek legal advice to deal with debt. In some cases, you may want to inform the debt collector that you plan to seek legal advice and suggest a time for them to contact you or a representative who will speak to them on your behalf.
Debt collectors have no right to mistreat you. Don’t hesitate to make a formal written complaint to the debt collection agency about any unreasonable behavior.
Also, contact the CFPB or the FTC for further guidance and support.
What to watch out for
There are several things to be wary of when it comes to debt collectors.
- Forceful tactics.
Don’t let the debt collector pressure you into paying before you’re certain the debt is legitimate. Request validation of the debt in writing the first time you’re contacted — they’re legally obligated to comply.
- Mistaken information.
Verify the debt amount and any information associated with it against your own records. If they don’t match up and you don’t think you owe the debt, dispute the debt in writing.
- Misleading information.
If a debt collector tries to convince you they’ll garnish your wages, take money from your bank account or send you to jail if you don’t pay, know your rights and report them if necessary.
Debt collectors can be intimidating, but knowing your rights and having all your financial ducks in a row can help ease your anxieties. You may not be able to steer clear of the entire process, but you can fully own what’s in your control.
Frequently asked questions
What will my payments look like if my credit card debt is passed on to a debt collector?
Debt collectors will set up a debt payment agreement with you through their agency. There may be an interest rate depending on the particular debt agency, but generally, there’s only an agreed amount and payment term.
How long does a default remain on my credit file?
In general, a default can stay on your credit file for up to five years, even if you settled the account in that time. However, if you have a default that’s considered “a serious credit infringement” it could be listed on your credit file for up to seven years.
If I have savings account with the same bank where I have a credit card debt, can it withdraw money from my savings account?
The bank can do this only if it has the required permission through a court ruling.
Any unpaid credit card debt that you’ve not addressed with your issuer could lead it to consider using a debt collector to settle the account.
While it can be intimidating to go through the debt collection process, learning more about it and understanding your rights and responsibilities will help you resolve the situation as quickly and reasonably as possible for everyone involved.
Pictures: Getty Images
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