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How to Deal With Debt Collectors

Here are your rights and an expert's recommended strategies

By Nick Clements

Debt collection agencies are infamous for aggressive collection tactics, which can include harassing customers and threatening them with litigation, wage garnishment and asset seizures. Little surprise that the federal Consumer Financial Protection Bureau (CFPB) says debt collection tops its complaints from consumers 62 and older.

But you have important rights if you get a call from a debt collector. You need to know them should the situation arise and then develop a strategy for dealing with a collection agency; I provide information on both below.

One key point: You’re protected by the Fair Debt Collection Practices Act (FDCPA), the main federal law governing debt collection practices, and if a collection agency breaks that law, you can complain to the CFPB online or by phone (855-411-2372).

3 Rights for Dealing With Debt Collectors

Here are three critical rights you should be aware of:

1. You can require the debt collection agency to verify the debt. Many people contacted by debt collectors don’t recognize the debt that the agency is trying to collect. In some cases, the debt isn’t actually theirs.

If you get a call from a debt collection agency, force the company to verify the debt before continuing the conversation. The agency is required to provide you with the name of the original creditor, the amount owed and how you can dispute the debt. If you don’t receive this information during the first contact, the debt collector must provide it within five days.

If you still don’t recognize the debt, dispute it and force the agency to verify it. Put the dispute in writing and keep a copy of your correspondence. Once you dispute the debt, the collection agency can’t contact you again until the dispute is investigated and it has provided you with verification of the debt in writing.

If you don’t agree with the validation, let the collection agency know that you plan to register your complaint with the CFPB and then do so.

If the debt isn’t yours, make sure it’s not showing up on your credit report. To find out, download your report for free from all three credit reporting agencies at Then, if you find an error, dispute it online.

2. You are protected by a statute of limitations. Collection agencies can continue calling customers until their debts are paid off, but a statute of limitations limits the firms’ ability to use the courts to collect the money. For example, after your state’s statute of limitations expires, your wages can’t be garnished.

In recent years, debt collection agencies have become aggressive trying to collect debt after the statute of limitations has expired. Make sure you know the statute of limitations timetable where you live; you can find a state-by-state list here.

3. There are limits to when a collection agency can try to contact you. Collection agencies are generally not allowed to call before 8 a.m. or after 9 p.m. If you are not allowed to receive such calls at work, you should tell the collection agency; once you do, they can’t phone you there.

You can also request that a collection agency stop contacting you completely. That doesn’t mean it can’t sue you, but you can make the phone calls and aggressive actions stop. The CFPB has prepared sample letters you can use.

A Strategy to Pay the Collection Agency


If you recognize the debt and are ready to pay the collection agency, you’ll want to have a strategy. Here are the most important parts of one:

In many cases, you shouldn’t have to pay back the full amount owed. Collection agencies buy debt from banks at pennies on the dollar; they don’t expect to receive the full amount from most people. Although these companies often sue high-income people who refuse to pay and may garnish their wages, this isn't the case if you have a low income. Then, your collection agency is highly likely to negotiate; you can often get settlements for 50 percent of the balance or less. The older the debt, the more willing collection agencies are to settle.

Get the settlement offer in writing before you pay a dime. The collection agency needs to be explicit that after receiving the negotiated settlement, it will consider the debt paid and forfeit all future ability to collect. Without an offer in writing, don’t proceed.

Never make a payment from your checking account. Once a collection agency has your account information, it will often try to take money out of your account. So I recommend opening a separate account whose only purpose is to make payments to the collection agency.

The best would be something like Bluebird from American Express, which has no minimum balance requirement, no fees and no overdraft charges.

A Final Word

Dealing with a collection agency can be overwhelming, and you may want to seek help. You need to be very careful, though, especially with for-profit debt settlement companies.

In almost all cases, you should avoid dealing with a for-profit agency. Most charge high fees (as much as 30 percent of your payment) and don’t do anything that you couldn’t do yourself.

If you want to seek outside help, consider going to a nonprofit consumer credit counselor. A good place to start is the National Foundation for Credit Counseling.

Debt collection agencies have a lot less power than you think, especially if you have limited funds. Just stay calm, remember your rights and don’t be afraid to reach out for help if you feel like your rights are being violated.

Nick Clements is a former banker turned consumer advocate and co-founder of the personal finance and lending information site by Lending Tree. Read More
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