8 Things Debt Collectors Won’t Tell You
Know your rights.
BY GERRI DETWEILER
This is a condensed version of an article that ran on Credit.com on March 14, 2012.
It should come as no surprise that if you’ve fallen behind on your bills, you may be hearing from debt collectors.But there are a number of things that they aren’t likely to tell you, and knowing these things can make all the difference in resolving your debts.
1. Some of Their Threats Have No Teeth
If you can’t pay the collector the amount he is demanding, or refuse to give your bank account or debit card number to make the payment, the debt collector may threaten to “put you down for ‘refusal to pay.’” But that’s “a meaningless phrase in the debt collection world,” said ZipDebt.com founder Charles Phelan, who coaches consumers trying to settle debts.
Another example? Bogus deadlines. “Collectors will always try to create a false sense of urgency by imposing a series of deadlines, after which ‘this deal will no longer be available.’ The reality is that settlement or workout offers tend to improve over the course of a typical 3-month collection assignment (i.e., in a non-legal collection scenario),” Phelan said.
2. They Have to Stop Bugging You at Work if You Tell Them To
The Fair Debt Collection Practices Act is very clear on this point. Once you tell a debt collector your employer doesn’t allow you to talk with them while you are at work, they must stop calling you there.
3. They Can’t Tell Others About Your Debts
Debt collectors are generally only allowed to discuss your debt with you, a cosigner, your spouse or your attorney. They cannot discuss your debt with neighbors, relatives who aren’t obligated to pay the debt or coworkers. In fact, under the FDCPA, they are generally only allowed to contact third parties to locate you, and once they have found you, contact with third parties must stop.
4. Your Debt May Be Too Old to Collect
“Stale debt is not collectible,” said Atlanta bankruptcy attorney Jonathan Ginsburg. “Every state has a statute of limitations that make debt of a certain age not collectible. Debt collectors are not currently obligated to advise you that they cannot sue you or legally ding your credit report if you refuse to pay stale debt.”
5. Debt Collectors Are Under Pressure to Collect
Collectors “work on sliding scale commissions and the quicker they get someone’s money, the higher the commission,” said Philadelphia debt collector abuse lawyer Michael Forbes.
So while collectors may pressure you to pay right away, staving them off a bit might work in your favor if you can’t afford to pay the full amount you owe. And just because you have accounts in collections that doesn’t mean you are doomed to bad credit for seven years or longer. In fact, there are steps you can take now to start improving your credit, many of which we outline in this guide to rebuilding your credit.
6. If They Really Want to Play Hardball, They Will Have to Sue You
If you owe unsecured debt such as credit card debt, collectors must typically sue you before they can go after your property, including money in your bank accounts, or try to garnish your wages. But threatening to take such actions before they have sued you and won a judgment may be illegal. Even threatening to sue you to collect a debt may be illegal if the collector has no intention of doing so.
7. Paying Off This Debt Won’t Help Your Credit Ratings
Under the Fair Credit Reporting Act, a collection account will remain on your credit reports for seven years and six months from the date you fell behind with the original creditor. Collectors may make it sound like paying off collections account will improve your credit by telling you that they will update your credit report to “paid in full” status. But this probably won’t help your credit scores. Collection accounts are negative, regardless of whether they are paid or not, though some newer credit scoring models do not factor in paid collections.
8. You’re Likely Not Responsible for Your Deceased Relative’s Debt
Generally, you aren’t responsible for the debts of relatives who died unless you were a cosigner, or the debt belonged to your spouse who died and you live in a community property state. (That doesn’t mean collectors won’t try to get your money, though.) You can learn more about what happens to debt after death here.
If you’re concerned about how your debt could be impacting your credit, you can check your three credit reports for free once a year through AnnualCreditReport.com. If you’d like to monitor your credit more regularly, you can get two free credit scores every 30 days Credit.com, along with an easy to understand breakdown of the information in your credit report using letter grades.
You can read the expanded version of this article here. If you have questions about debt collection or anything else money-related, ask us. You can find us on Twitter and Facebook or send your questions to firstname.lastname@example.org.