7 tips for dealing with debt collectors

Have you ever been contacted by a debt collector?  According to the Consumer Financial Protection Bureau’s Consumer Credit Panel, about 26 percent of consumers with a credit file has a debt that is being collected by a third party. 

“This number seems to be increasing,” says Mike Sullivan, personal finance consultant at Take Charge America. “Sometimes this is because of increased collection efforts with medical debt and with student loan debt, which are very common among Americans.”

Sullivan highlights the seven things you should and shouldn’t do if you are contacted by a debt collector.

Don’t chit chat

Be careful what you say on the phone. Don’t offer the debt collector a lot of information or engage in a long conversation. Sullivan says they may be recording what you say on the call to use the information against you. What you should do is request validation of the debt. Then get off of the phone immediately. He says collection agents are trained to influence your behavior and what they want you to do will most likely not be in your best interest. 

Do validate

Collection agencies can only collect a debt from you if they can prove it’s yours. Sullivan says you have five days from the time they contact you to get this verification. The letter should state the amount that you owe and who you owe it to. He says there is a great amount of debt that is collected or attempted to be collected that is not actually owed. There’s also a lot of debt that can’t be validated. That is why it’s important to verify if the debt is in fact yours.  Sullivan says if it isn’t, you should investigate the matter further. If any incorrect debt is attached to your name, it could indicate possible fraud or identity theft.

Don’t pay in good faith

“We don’t want this to be difficult for you. Why don’t you give us $5 now to show you are serious about making a payment, then we’ll talk next week about some kind of convenient payment schedule.” – debt collector

Sullivan says this technique is commonly used by debt collectors. Don’t fall for it! There is a statute of limitations in every state about how long a creditor can sue you for payment of a debt. If the collector gets a statement from you that the debt is owed, it resets the clock on the statute of limitations. Paying $5 is “confirming” you owe the debt. So instead of having two years to wait out the debt, you may now have another five to seven years for the debt collector to potentially seek a judgment against you. Sullivan says if there’s any question you can't pay the debt, don’t make any payment.

Do keep a log

State and federal laws control what collection agents can do and when they can do it. Sullivan says you should have a written record of all correspondence with debt collectors. Your notes should contain specific information such as how many calls/letters you received, from who, what time and the subject. He says your log will be critical if the debt collector sues you. Your notes may also be helpful if you plan on suing the debt collector for violating any laws. Sullivan says that happens more often than people might think.

Do dispute

You may not be sure of the amount or the date of the debt. It’s also possible the debt isn’t even yours. Sullivan says if you are uncertain, send a certified letter challenging the debt. If you send the letter within 30 days, that will force the agent to stop their collection efforts. What if the agent instructs you to challenge the debt online or verbally on the phone? He says don’t listen to them. It’s important to have a written record of whatever you send them. Before you take any action, wait until you get a response in writing that proves the debt is yours. The debt collector should also indicate if they are going to try to collect the debt. Sullivan says filing a dispute is a good way to buy time and to find errors.

Do get help

Sullivan says most of the debt that goes to collections is legitimate. If it is your debt and you are feeling overwhelmed, don’t be afraid to ask for help. He says a credit counseling agency should be your first step because it’s far less risky and doesn’t cost anything. It also doesn’t commit you to any long-term contractual agreements. A credit counselor can help you deal with collection agents and set up a reasonable repayment plan. Another option is a bankruptcy attorney. Sullivan says only choose this option if you have no choice but to file for bankruptcy and there's absolutely no way you can ever pay the debt. He cautions consumers against using debt settlement agencies. Those companies deal with settling debt rather than repaying it. Sullivan adds that debt settlement doesn’t work as often as it should. Not only could it potentially ruin your credit and finances, there may also be some tax implications.

Do understand your rights

Sullivan says a lot of people mistakenly believe that collection agents can do anything they want. Understand your rights! He says they can’t call you at all hours of the day and the night. They can’t call your family. They can’t insult you. They can’t threaten you. They can’t under most circumstances call your employer. If a debt collector violates your rights, Sullivan says you should file a complaint with the Federal Trade Commission. Your state should also have an agency which deals with consumer issues, typically in the attorney general’s office. 

“Many, many people are going to run into debt collectors and find it one of the most terrifying situations in their entire lives,” he says. “Don’t let it ruin your life. Take action as soon as you can to make this a less harmful, less dangerous situation by understanding what you can do.”

Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content.  You can follow her on Twitter @lindanbell.