How do I Deal with Debt Collectors?

Should I ignore a Collection Agency?

No. Dealing with debt collectors is nerve-wracking. You know that they’re not on your side and some can even cross the line into harassment and abuse. Yet ignoring a debt collector is usually a bad idea, as they can take actions that will cause financial harm both now and in the future.

Should I pay a debt collector?

The first three things you should consider when deciding whether or not to pay a debt collector are:

1. The age of the debt.
2. The debt’s impact on your credit.
3. If you have the means to pay the debt.

The age of the debt matters because each state has a statute of limitations. This means that, after a certain number of years, the debt may not be legally enforceable. In Connecticut, for example, if you haven’t made a payment on a credit card debt in three years, a debt collector can’t sue you to recover that debt. In Massachusetts, the statute of limitations for revolving credit accounts is six years. There are different limits for other types of agreements, such as written contracts, oral contracts, and promissory notes. If the debt in question is past the statute of limitations, then making any type of payment – no matter how small – will restart the clock and the debt will once again become legally enforceable. In other words, the collector could sue you in court and get a judgment against you.

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from making false or misleading representations about a debt. One provision (15 U.S.C. 1692e) states that a debt collector can’t threaten to take an action that can’t legally be taken. This means that a debt collector can’t threaten to sue you if the debt is past the statute of limitations. In Pantoja vs. Portfolio Recovery Associates, LLC, the appellate court upheld a lower court’s ruling that the debt collector violated the FDCPA by sending Mr. Pantoja a collection letter trying to restart the clock on a 20-year-old debt.

Another consideration is the debt’s impact on your credit. When a debt is in collection, the debt collection agency typically notifies the consumer reporting bureaus. The debt collection activity will then show up on your credit report, and can negatively impact your ability to obtain credit and force you to pay a higher interest rate. Credit reports are sometimes used by employers (if they’ve obtained your permission) for hiring and promotion decisions, so a debt in collection could prevent you from getting a job or a raise. The FDCPA and Fair Credit Reporting Act (15 U.S.C. 1681) outline the responsibilities of debt collectors and credit bureaus regarding disputed debts and time-barred debts. For example, in 15 U.S.C. 1681c, the FCRA requires that credit bureaus must note on a consumer’s credit report that a debt is disputed.

The third consideration is whether or not you have the means to pay the debt. If you’re not able to pay the debt, then the question of whether or not you should pay the debt collector is moot. You may simply want the debt collector to stop calling you. You are within your rights under the FDCPA to send the debt collection agency a cease and desist letter. Once you tell them that you no longer want them to contact you, then they can only get in touch for two reasons: to tell you that they are stopping collection efforts, or to tell you that they are suing you to collect on the debt.

If you do have the money to pay the debt collector, then you may wish to consider negotiating a debt settlement.

Negotiating a debt settlement

It makes sense that most consumers don’t understand how debt collection agencies work; indeed, debt collectors count on consumer ignorance about the debt collection process. When a creditor hires a debt collection agency, the agency is typically paid a commission. In other words, they receive a percentage of whatever they are able to collect. In addition, individual debt collectors are often paid bonuses if they hit certain recovery targets. These arrangements incentivize debt collectors and the agencies they work for to put the pressure on consumers to pay off debts quickly and completely. However, the flip side is that a debt collection agency will settle for a percentage of a smaller dollar amount rather than 100 percent of nothing.

This means that debts are negotiable. For example, you may be able to settle a debt for 50 percent of the amount owed if you’re able to make a lump sum payment. Or you might arrange to make six installment payments totaling 75 percent of the total debt in exchange for the debt collector to consider the debt paid in full.

When negotiating a debt settlement, it’s important to:

• Refrain from overpromising.
• Get the agreement in writing.
• Use a traceable payment method.

It can be tempting to promise a debt collector anything in order to get them off your back. When negotiating a debt settlement, however, it’s important to under-promise and overdeliver. Don’t agree to pay a lump sum that you can’t afford to pay, and don’t agree to a payment plan if you won’t be able to meet that obligation. Be realistic. Once you do reach an agreement, pay promptly and don’t give the collector any excuse to come knocking.

It’s important to get any agreement you make in writing. Debt collection agencies churn through debt collectors. The high turnover rate means that the debt collector who makes a promise today might not be around tomorrow. Having documentation of your negotiated settlement is imperative in holding the debt collection agency accountable.

Lastly, when you make the lump sum or installment payment, use a traceable payment method. You want to make sure that you can prove that you made the payment and that they received the money.

Keep in mind that, in addition to negotiating the amount of the settlement, you might also be able to negotiate how the debt is reflected on your credit report. For example, you may convince them to agree to mark the debt as “paid in full” or “paid as agreed,” which will be less damaging than “paid settled” or “settled.”

How do I deal with abusive debt collectors?

Prior to paying a debt collector outright or negotiating a debt settlement, it’s important to establish that the debt is your responsibility to pay and that the debt collector isn’t violating the law.

In addition to the issue of time-barred debt, discussed above, a debt collector may be calling you about a debt that is not your responsibility. For example, a debt collector may have you mixed up with someone who has the same name or who previously owned your phone number. An unscrupulous debt collector may tell you that it’s your responsibility to pay for your child’s debt, your parent’s debt, or a sibling’s debt. That likely isn’t the case.

While it may seem farfetched that a debt collector might violate the law, FDCPA violations happen frequently. Some of the more common violations include:

• harassing you with frequent phone calls,
• using abusive or profane language,
• calling you at work when you’ve told them not to,
• telling other people about your debt, and
• threatening to sue you when they have no intention of doing so.

If you suspect that you may be a victim of debt collection abuse, the FDCPA empowers you to sue the debt collector in court. If the debt collection agency is found to be in violation, you can recover up to $1,000, along with court costs and attorney fees.

Lemberg Law has a team devoted to representing people who have been harassed, threatened, deceived, or abused by debt collectors. Call 475-277-1600 and receive a free consultation, or submit our online request form.

Case citation

Pantoja vs. Portfolio Recovery Associates, No. 15-1567 (7th Cir. 2017)