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How to Deal with Debt Collectors

Know your rights and how to get a debt collector to stop calling you.

By
Laura Adams, MBA,
Episode #170

How to Dispute a Debt with a Debt Collector

After a debt collector makes initial contact with you, they have to send you a written “validation notice” about your debt within five days. The notice should include the name of the creditor and the amount they believe you owe. If you don’t agree that you owe some or all of the debt, take these four steps to dispute it:

  1. Tell the collector over the phone that you believe there’s an error and ask them to stop contacting you.

  2. Send a letter to the collector, within 30 days after you receive their validation notice, stating that you believe they’re mistaken and to stop contacting you. You’ll find a link to some sample collection letters at the end of this post.

  3. Make a copy of the letter for your files.

  4. Send the original letter by certified mail and pay for a return receipt so you have proof that it was received. 

After they receive your dispute letter, a collector can only contact you to confirm that they won’t be contacting you anymore, or to inform you about a legal action that they’re going to take—like filing a lien or a lawsuit.

However, if the debt collector sends you back a written verification of the debt, such as a copy of a credit card bill that you haven’t paid or a promissory note that you signed, then the process starts over and they can contact you again.

What Can't Debt Collectors Do?

Debt collectors are prohibited from harassing you or lying to you.

Debt collectors are prohibited from harassing you or lying to you. The following are some examples of what’s not allowed:

  • Calling you repeatedly

  • Threatening to harm you or using profane language

  • Publishing your name as someone who hasn’t paid a debt (except to a credit reporting agency)

  • Misrepresenting their identity, company name, or the amount you owe

  • Telling you that legal action will be taken against you if they don’t intend to do it or if doing so would be illegal

  • Sending you anything that looks like an official government document if it isn’t

  • Depositing a post-dated check early

  • Mailing you a collection notice by postcard 

What If a Debt Collector Violates the Law?

You can report a debt collector who violates The Fair Debt Collection Practice Act to your state Attorney General’s office and to the Federal Trade Commission. You can also sue a debt collector within one year of a violation. If you win, they’re liable for damages that you can prove, such as lost wages. You could also be reimbursed for your attorney’s fees and court costs. However, winning a case against a collector who violated the law doesn’t erase your debt if you still owe it.

What If You Get Sued By a Debt Collector?

If you refuse to pay a debt, a creditor or debt collector can sue you to collect their money. Here’s an important quick and dirty tip: If you are sued, be sure to respond to the suit personally or through an attorney by the deadline specified in the papers. That will preserve your rights in the case. If they win, a judgment is recorded at the court which allows the creditor to take their collection efforts to the next level. They could garnish your wages at work or direct your bank to withdraw funds from your account to pay the debt.

More Quick and Dirty Tips for Dealing with Debt Collectors

Some additional tips for dealing with a debt collector are to keep records of all your phone conversations with them. That includes the date, time, their name, their company name, and what was discussed. Save voicemail messages and all written correspondence from a collector. If you negotiate payment terms or to reduce the amount of your debt, be sure to get the agreement in writing before you send the collector any money. It’s also a good idea to pay with a cashier’s check instead of a personal check so you don’t reveal your bank information.

Oh, and one more thing: Be wary of debt-related scams. While there are reputable non-profit credit counseling agencies that can help you create a budget and manage your debt, proceed with caution if you get an unsolicited offer from a company that promises to settle your debts for less than you owe.

I certainly recommend that you pay all your bills on time. But if you can’t, try to get help before the collectors come calling by communicating directly and honestly with your creditors. They’re more likely to give you favorable treatment when you take the initiative to let them know you’re having a temporary financial setback but that you still plan to pay your debt.

More Resources:
 
 

Debt image courtesy of Shutterstock

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

 

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