Important Things To Know About Debt Collectors
There are very few things worse than getting a telephone call while you’re sitting down with your family eating dinner. Especially when that call is a debt collector trying to pressure you into settling old debt. If creditors are calling you, don’t worry – by understanding how debt collection works you can have a few advantages over these agencies.
How Debt Collection Works
Most big companies aren’t in the business of tracking you down for money owed. After a certain period of delinquency on your account, creditors will normally turn your records over to a debt collection agency.
These companies normally work in one of two ways:
- They purchase your debt outright from your original creditor. They will pay a fraction of the debt’s total value, depending on the length of the delinquency and the likelihood of recovering payment. For example, an unpaid loan that is only a few months delinquent may be sold to a debt collection company for 85% of the total value, while one that is a few years delinquent may change hands for 20% of its original value.
- Your original creditor may give a specific debt collection company an exclusive window of opportunity to collect the debt from you. This can range from a few weeks to months. During this time, the company has the chance to earn a commission if they’re able to successfully recover payment.
Luckily, if you have debt collectors calling you on past-due accounts, you do have a few tricks in your corner apart from hiring a debt counselor to handle your creditors. Here are a few things you should know that debt collectors won’t tell you:
1. There Are Time Limits For When They Can Call
If you’re receiving phone calls from a debt collector, it may feel like they are contacting you nonstop. While some agencies are heavy with the phone calls, especially at first, there are rules and regulations that they must follow. Federal law prohibits a debt collection agency from calling you before 8 in the morning, and after 9 in the evening. If an unscrupulous collector is calling you outside of these hours, you can report then to your state’s attorney general’s office, as well as the Federal Trade Commission.
2. You Can Stop Them From Calling You At Work
Debt collectors are similar to salespeople, and like such they use many different psychological strategies to try and recover payment. One method that they use is calling past-due account holders while they are at work. For a majority of people in debt, having collection agencies calling at work can be embarrassing, and most people are more eager to agree to a settlement in order to prevent further phone calls in the office. What the debt collectors won’t tell you is that federal laws prevent them from calling you at work if you specifically ask them not to.
3. Settle For Pennies On The Dollar
The longer that your debt goes unpaid, the less valuable that it becomes to the debt collection agencies. This is because of the diminishing likelihood that it will be paid. As mentioned earlier, after a significant amount of time most debt is traded for a small percentage of its initial value. Thanks to this fact, creditors are normally willing to settle your debt for much less than you originally owed. This will take some negotiations, because the amount the debt collection agency gets you to agree to is directly correlated with the amount of money that they earn.
4. Your Debt’s Time Limit Will Eventually Run Out
Unpaid debt does not stay with you forever. Depending on the state in which you live in, debt collection companies have a set amount of time during which they are able to attempt to collect from you. This can range from 1-6 years, and is different from the amount of time that the length of time which it can stay on your credit report. Even if your debt can no longer be collected, it will still remain on your credit report for seven years after your last payment.
Debt collectors can be a hassle that most people would rather not deal with. Luckily, their business is well regulated and they are many rules that they have to follow. Settling old debts is the fastest way to get debt collectors out of your life, but being an informed consumer provides you with a number of tricks up your sleeve when it comes to dealing with a debt collection agency.
Author Bio: Kostas Chiotis is an economist and the blogger behind FinanceBlogZone.com. He enjoys sharing his views and opinions around the web. He wrote recently a post which you can check here about 21 ways to get out of debt don’t forget to read it!
Photo via CNN Money