Important Things To Know About Debt Collectors

Important Things to Know about Debt CollectorsThere 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:

  1. 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.
  2. 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 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

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Leave a Comment:

Matt Becker says October 3

Good stuff here. Isn’t there also a law about how often they’re allowed to call you at home? In any case, if you want to settle you should make sure to go into the conversation with a clear understanding of what you can pay and when you can pay it. You want to dictate the terms to them, not the other way around. And make sure to get any agreement in writing before going ahead with it.

    Kostas @ Finance Blog Zone says October 3

    You are totally right Matt, it’s really important to dictate the terms and not just accept the lenders terms, thanks for your comment!

FI Pilgrim says October 3

I’ve only had to deal with debt collectors a couple of times, and it turned out to be for charges I didn’t know I had (due to an old mailing address or some other mix-up). They are no fun!

DC @ Young Adult Money says October 3

These are great tips and things that people should keep in mind who have been harassed by debt collectors in the past. It’s good to know that there are certain protections built into the law if you find yourself in this situation.

    Kostas @ Finance Blog Zone says October 3

    Some times debt collectors take advantage of the ignorance some people have so it’s really important to know as much as possible…

AverageJoe says October 3

Boy, that advice about calls at work is invaluable. I’ve been in two situations where one of my coworkers was called at work and it was uncomfortable for everyone. I didn’t know that you could tell them to not call you there.

John S @ Frugal Rules says October 3

I unfortunately had my own personal experience with debt collectors and it was a major hassle. Thankfully they never called me at work, but I saw that happen at my last job and it was always an uncomfortable feeling to see people get harassed like that at work.

Stefanie @ The Broke and Beautiful Life says October 3

When I moved a few years back and got a land line we had debt collectors calling ALL the time. It was so frustrating because they were calling for the previous residents.

    Simon @ Modest Money says October 3

    Hahaha, something quite similar has occured to me. You have to keep explaining that you are not the one. Debt collectors aren’t necessarily known for their civility!

Stephen@cellsolo says October 3

As an active investor on LendingClub, it’s interesting to read about the debt collection process that occurs when a borrower doesn’t pay. It seems like a lot of what I’ve read in this article is what occurs on the LendingClub platform’s debt collection process. It can be very frustrating when someone you have lent money to disappears and is no longer making payments.

Brian @ Luke1428 says October 3

Solid information here for anyone facing this issue. Many collectors are trained to touch your fear buttons and stir up emotion to get you to pay. Keep a level head and don’t let them get to you. Making payment decisions based on emotions could be worse than getting into debt in the first place.

Kurt @ Money Counselor says October 3

You really have to know and be aggressive defending your rights when it comes to debt collection. The rules specifying what debt collectors cannot do in the Fair Debt Collection Practices Act seem to serve as a business model for most debt collectors!

Just because you legitimately owe and are late on a debt doesn’t make you a human punching bag. Many consumer law attorneys will sue debt collectors for a fee that’s a percentage of the eventual settlement.

Jake @ Ca$h Funny says October 3

This is a good overview. I don’t think many people realize what rights they have when it comes to a debt collector. From what I’ve heard, the majority of debt collectors won’t follow the rules until you make them follow them. Hopefully I never find myself in this situation, but I will at least know how to deal with it if I ever do.

Shannon @ The Heavy Purse says October 3

Great information. Most people getting calls from debt collectors probably feel as if they have no recourse or rights, but they do. It’s important that they know what those rights are and take advantage of them.

Kostas @ Finance Blog Zone says October 3

I am glad that you liked it Shannon. Every consumer should know his/her rights and how to defend himself…

Brent says October 3

Great info for those people facing collections. I hope that people never have to go through this but if they do, it’s nice to see they have a good resource to reference. An open and honest conversation with a debt collector and willingness to set up, and follow, a payment plan I’m guessing would go a long way.

canadianbudgetbinder says October 3

I could never do the job of a debt collector but in that sense a debt is a debt and it should be paid. I’m sure that if everyone defaulted on debt then what would be the point of even having money if it was that easy. Great post.

Mark Ross says October 4

Great article! I didn’t know before that there’s a certain time period on which a debt collector can call or talk to you. I think you elaborated things a person could do to keep debt collectors out of their life very well.

moneystepper says October 4

Debt collecters can really be unpleasant and make your life hell. It is essential for everyone to know their rights here (not required to allow them access to property etc etc) and defend themselves if they believe they are not in the wrong.

Scott says October 5

On the flip side – the worker you do talk to is stressed and desperate. They’ve heard it all, they get yelled and cursed out. They have numbers to meet, so it’s no surprise they’re going to put the hammer down. Talking about owing money isn’t a good topic.
As for selling debt–not all collection agencies do. So that a lie. Also, not all debts can be settled. Examples are utility debts. In addition, some creditors have requirements if you do accept a settlement, if you want an account in the future you’ll have to pay the rest of the balance.

As for calling at work — a majority of the time it was the consumer who gave his or her work number out. So, if you get a call there then don’t act surprised. You are allowed to tell them not to call you. You can send a no calls letter via certified mail.

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