Debt collection is consistently one of the top financial issues that people have problems with.
If you get a call out of the blue saying you owe somebody money, what should you do?
What To Do If A Debt Collector Calls
If you get a call from somebody representing themselves as a debt collector don't panic. The caller could be a person trying to scam you, it could be a misunderstanding, it could be a debt you forgot about, it could be an error, or it could be a valid debt.
The first thing you want to do is try and figure out exactly what is going on. To this end, this is what you should ask the caller:
- Their identity, including name, address, and phone number
- The company they work for
- The amount of the debt
- What the debt is for and when the debt was incurred
- The name of the original creditor
- The name and address of the person who owes the debt
Keep a log of the call. Write down the date and time they called, and who you spoke to. This will help you keep track of how often a certain creditor calls and what they say. This can also help you document any inconsistencies in what they say to you from one call to the next.
Ask them who they are trying to contact. This is important. They could be looking for somebody who has a similar or identical name to you.
This happened to me a few years back. The lady I spoke to said that my name was the first one to come up when they did an internet search, so I was the first one they called. I explained to the nice lady that I had never been in Tehachapi or Tonapoh and had no idea what she was talking about. After some discussion she realized I wasn't the one they were looking for and that was the last I heard from the collector. Of course, I still have her name and number somewhere on my computer in case I ever hear from that collection agency again, just in case.
You can also refuse to discuss any debt until you get a written "validation notice." You can always ask for everything in writing. Calmly tell the person on the other end of the phone to send you written notification of the debt. If it is a valid debt they will have no problem with that, if they are a scammer they won't do it.
If You Don't Think You Owe The Debt, Explain Why
If you feel it isn't a legitimate debt, tell the collector why.
Many times, collectors aren't aware that you may have paid the debt to the original debtor. This happened to me one time with a hospital bill. I got a call from a debt collector saying I owed a lot of money, during the call I found out it was from a hospital bill. I then called the hospital and asked them what was up, explaining that insurance should have taken care of things. The lady there said that it had slipped through the cracks and gone to collections instead of insurance.
By dealing with the collector and explaining myself I managed to suspend their collection actions, and then by going to the original debtor I managed to get things fixed at the source
Bullet dodged, but not without a couple of months of back-and-forth saber rattling.
If You Owe The Debt
If the debt is a valid one, you know you have to pay it back. The best thing to do is be honest and show good faith to the debt collector. These people have a pretty crappy job, so when they do reach someone that is nice and willing to pay back a debt they will go a long way to make it easier for you too. Sometimes they will reduce the amount they will collect if you work with them.
To get ready to negotiate a settlement or repayment agreement with a debt collector, consider this three-step approach:
- Learn about the debt
- Plan for making a realistic repayment or settlement
- Negotiate a realistic agreement with the debt collector
Be wary of companies that charge money in advance to settle your debts for you. Some debt settlement companies promise more than they deliver.
What To Do If A Creditor Or Debt Collector Sues You
You obviously don't want it to get this far, but if you're sued by a debt collector, respond to the lawsuit. You can respond personally or through an attorney, but you must do so by the date specified in the court papers.
When you respond to, or “answer,” the lawsuit, the debt collector will have to prove to the court that the debt is valid and that you owe the debt.
If you ignore a court action, it's likely that a judgment will be entered against you for the amount the creditor or debt collector claims you owe. Usually the court will add additional fees against you to cover collections costs, interest, and attorney fees.
What Not To Do If Contacted By A Debt Collector
This is what many scammers hope you will do. You get a call saying you owe the IRS $5,000 and they will come after your house, you panic. Well, of course we all know the IRS won't call you out-of-the-blue, but everyone's first reaction when they get a call like this is disbelief and then worry. That is what the scammers hope for.
Don't Give Out Personal Information
We all know not to give out your social security number or bank account information, but also don't discuss your financial situation. If you tell the person on the phone that you just spent all your money on a new flat screen TV, they may just drive over to your house and help themselves to it when you're not home.
Never Admit You Owe The Money
Collectors can use this as a reason to start coming after your assets. Normally they have to go to court for that, but if you admit the debt over the phone, you have basically plead guilty without going to court.
Don't Be A Butthead
Collectors normally record all their calls, if you cuss, yell, or tell them you are coming by their house to kick their dog you can get into trouble. If the collection does go to court, and they give the judge all the phone recordings, who do you think the judge will side with?
The Law Is On Your Side
Believe it or not, you do have some protections against debt collectors. The Fair Debt Collection Practices Act keeps debt collectors from calling you before 8 a.m. or after 8 p.m., allows you to keep them from calling you at work, lets you request in writing they cease calling you at home, and keeps collectors from threatening you with bodily harm or arrest. They also can't threaten to sue you unless they truly intend to take you to court.
The Bottom Line
If you do get a call from a debt collector, keep your wits, be polite, and get as much information from them as you can to verify their claims. You can always request everything in writing. If the debt is valid, pay it back or you will end up paying more in the long run.