Any person or organization owing a debt should try to pay it back as quickly as possible. However, once the lender decides to hand over the matter to a debt collection agency, matters turn serious. Many debt ridden people have faced debt collectors who showed up at the workplace or residence randomly. Debt collectors may sometimes contact relatives and eventually drag the debtor to court. But, knowing a few important tips and things to avoid can help people deal with these agencies without hassles.
A number of debtors panic or get frustrated and result in ignoring these agencies. There are numerous reasons for people to avoid such actions:
1. The credit score of a person suffers immediately when their debt goes into collection. Ignoring the debt collection agency will further result in a bad report being sent to the credit bureau which can drastically reduce a person’s ability to take loans or credit in future.
The debt will not remain the same or reduce on ignoring a collection agency. In fact, collection agencies are allowed to add interest along with cost of collection and penalties to the indebted amount. Thus, the debtor may have to pay a lot of extra money in the end for closing the debt.
2. It’s not unusual for agencies to transfer their clients to other debt collectors. Therefore, even if debtors evade an agency, they will soon have another one bugging them. Since collection companies transfer all of their data, the next debt collector will know the unsuccessful attempts at collection and hence use more hostile tactics.
3. Debt collection agencies are allowed to contact a debtor’s neighbors, employer and relatives in case their attempts to reach the debtor are unsuccessful. These agencies can only contact them to reach the debtor and are not permitted to discuss their debt or financial details. But, such phone calls from debt collection agencies can always raise questions.
4. Many employers look at the credit score of their employee to check their reliability. A poor credit score may thus impact the future and current career options for the debtor. Avoiding communication with collection agencies will only increase the number of bad remarks.
5. On failing to communicate with the agency, they will ultimately be forced to sue the debtor. Defending such cases is very hard and often an agency can register a judgment against the debtor which can permanently deform their profile. Also, in such a case, the agency is usually entitled to a much higher recuperation amount than the initial debt by garnishing the debtor’s wages and bank accounts.
6. Not talking to a debt collector doesn’t relieve the stress but may increase it sometimes. While talking in the first instance generally helps in avoiding further disturbances, ignoring them usually causes the debt collectors to make repeated attempts until they get a response. Also, avoiding the debt collectors will make the creditors and collecting agency skeptic about the debtor which can pose troubles later while negotiating.
During debt collection, debtors can do certain things to avoid being stuck in a bad spot. Avoiding these simple things can help debtors in the long run:
1. Debt collectors may push the debtor to make immediate payments when talking on the phone. They make lucrative offers such as deletion of bad records from credit history but once the debtor has paid the amount then there’s no leverage left to force the agency to commit to its claims. Debtors should wait for their offers in written before making any payments as debt collectors may have made false claims for quick collection and higher commission. By law, debt collection agencies are required to send the debtor written details about the debt within a few days after first successful communication.
2. While talking on the phone initially, debt collectors appear to be very polite and docile. They seem concerned about the debtor and ask them questions about their relatives who can help and financial conditions. These are simple tricks to gather more information about the debtor and force them to pay money using these sources at a later stage. Debtors should altogether avoid giving any details about their relatives, salary or bank accounts to these agencies by stating that they have simply exhausted their resources.
3. Debt collection agencies often ask for post-dated checks promising that they won’t cash them before the given date. But debtors should always get such promises in written as there have been many cases where the collection agencies have cashed them earlier than promised, increased the amount on the checks or tapped into debtors’ accounts through bank details on the check. Overall, it’s better to simply avoid giving any post-dated checks to such agencies.
4. Debt collection agencies may have bought the debts from another organization or may be collecting on their behalf for a certain commission percentage. Therefore, it is always possible to negotiate and reduce the debt amount. Many debtors fail to talk to the creditors or collection agencies and later regret for bad remarks and extra amount paid. Debtors should always try negotiating to minimalize or eradicate bad remarks from their credit score and reduce the debt.
5. Debt collectors may show up at the workplace of the debtor or call them repeatedly causing disruptions in their work and office environment. Instead of arguing or hastily paying them extra amount, debtors can remind them on phone or give a written application that the Fair Debt Collection Practices Act prohibits any debt collectors from calling at work if the debtor’s employer doesn’t allow it.
6. Many times, people do not keep call recordings, messages and other evidence only to later discover that they have paid an unfair amount. Debtors should always check the claims of the creditor and debt collectors to make sure that they are not lying and also keep proof in case they need it in court later. In many cases, the law doesn’t require debtors to pay a stale debt or debt of a deceased relative and they can easily contest the claim of collection agency in a court.
7. Commonly, debtors don’t plan ahead and end up being dominated by the trained debt collector. Having a plan helps the debtor to stick to a story and stay calm during the conversation which can be exceptionally helpful while negotiating. Also, asking relevant questions can deter the collector from lying or using any false tactics as it gives an impression of a well-informed debtor. A well planned conversation also helps people to negotiate clearly and only disclose the amount which they can afford to pay.
Thus, following these simple instructions can help debtors to smoothly deal with debt collection agencies and minimize their losses. A debtor can also hire a professional to negotiate on their behalf and evaluate their case especially if they have a considerable amount of debt. Being well represented can help the debtors in getting a variety of benefits along with significant reductions in the debt amount.