Dealing with collection agencies is not the most pleasant experience one can have. I hope you have not been in this unfortunate situation, but in case you find yourself talking to a collection agency; these tips on how to handle collection calls maybe helpful. If you have a large amount of debt I suggest you look into debt reduction strategies before things get bad.
- Collection Agency Help
Understanding Collection Agencies
In order to deal with collection agencies effectively you have to understand them and how they work. When it comes to collecting debt through a collection agency there are two different types; 1st party and 3rd party collection.
1st Party Collection
This is when the original lender hires a collection company to collect on an outstanding debt; the collection agency is only acting on behalf of the lender and you can still negotiate with the original lender. It is usually fairly easy to handle these types of calls.
3rd Party Collection
This is when the original lender writes off your debt and sells it for pennies on the dollar to a collection agency. The collection agency hopes to collect the outstanding amount for a profit; the agent’s income depends for the most part on collecting on the debt and for this reason
3rd party collection calls can turn nasty most of the time. The original lender will no longer be able to help you in this situation. These tips can help you in dealing with collection agencies.
Important Rules
- Collection agencies may not make harassing telephone calls of such as repeated calls to you while you’re at work. If you believe a collection agency is harassing you, keep a record of the time, date and frequency of the calls. In most provinces and states they can only call 3 times in any 7 day period.
- They may only call between 8am and 9pm on Monday to Saturday and on Sunday between 1pm and 5pm. No calls are allowed on statutory holidays.
- Collection agencies may not contact third parties such as your friends, relatives, neighbors or employer for any information other than your address or telephone number (Location information).
Tips Dealing with Collection Agencies:
- All communication should be in writing. Sending everything in writing provides you with documentation that you may need later on if you decide to report the collection agency. Insist, in writing, that the collection agency only deal with you in writing as well.
- Check the statute of limitation in your province or state, some debts have a certain time limit, after which the debt is no longer collectible. There can be no legal action taken against you after this time. Make sure you know the statue of limitation before you pay, because making a payment causes the statute of limitations to restart. This is why sometimes the agent may tell you to make a small payment to avoid “further proceedings”.
- Negotiate with the collection agency; they can always reduce the amount owed sometimes by as much as 70% or more. Some may also allow you to make a payment plan to pay off the debt. Do this in writing and keep all your receipts.
- Do not admit to debt you are not sure about, ask the collection agency to prove the debt and their right to collect. They have 30 days after the receipt to prove this. Again make sure it’s in writing.
- You may ask the collection agency to cease communication. They will only be able to contact you to let you know that they are not pursuing your debt any more or that you are subject to legal action. Make sure you do this in writing.
These are just a few tips that I hope can help you when dealing with collection agents, in USA review the Fair Debt Collection Practices Act and understand it, this regulates debt collection agencies (not the original creditor). In Canada there are similar regulations put in place by your provinces, so check with your province for details.
Collector’s can NOT threaten you in anyway, if you feel harassed or threatened by a collection agency file a complaint with your Consumer Affairs office.
UPDATE (Sept. 01, 2009) I would also recommend you check your credit report and credit score to ensure the information is correct, check out basics on credit scores and reports.
I hope you will never have to deal with this situation, but if the unfortunate happens than these tips may help you.
Do you have any tips you would like to share?
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Article by Ray
Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.
Ray has written 271 articles.
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{ 8 comments… read them below or add one }
I had a problem with purchase I never made on a card a thought I had canceled. I started getting phone call after phone call. After several letters to the original creditor and getting now where I was on the verge of going to small claims court. My biggest problem with the debt was the negative impact on the credit and the $150 of fees and interest was a mere annoyance. I decided on a whim to the to BBB.org just to check out the rating of the company. I found they have a dispute resolutation form. I filled it out and in about 2 weeks I got a letter with a resolution and the problem was solved. works well with top rated companies.
@Ben, thanks a lot for sharing Ben. BBB is definitely a good place to look into.
what are in your opinion the bestest agencies in canada?
My wife recieved a letter from ALW trying to collect a nearly ten year old (before we were married) medical debt. It was not a large amount but within 5 days I sent a response letter requesting validation of the debt. The same day I sent the response she recieved another letter from ALW. It was an attempt to collect the same debt but the ALW account number was different. When collection agencies send followup letters do they typically change the account numbers? Should I simply request validation to the second letter as I did for the first? Should I suggest they check their records for clerical errors. Any harm in accusing them of fraudulantly attempting to collect multiple times on the same debt and threatening to report them?
@ Deborah, a couple of things to note: 1. It could be just an error or maybe a different debt, but the best thing to do as always is ask for validation which you have done. First I’d try to find out what the issue is before threatening if you do find in fact they are trying to collect twice than contact consumer affairs.
2. Not sure where you live but 10 years almost certainly puts the debt out of the statue of limitation period. Although still your debt, there is no legal action the agency can take to collect on the amount (however please do check the statue of limitation period in your state/province). You can pay the debt in full, settle it with the collection agency or just ignore it.
On 8/15/09 my veh was broken into and my purse stolen. Everyone, with the exception of one company, has been very understanding and I cooperated with all of them sending them police report, letter from my bank, notarized letter from me, etc.
I mailed most of this out 9/17/09. One company said they never received it, so I faxed it the next day. Now they say they never received the fax copy (I told them my fax report indicated they got it) and I faxed another one today (12 pages) and asked for
a fax receipt or email receipt of the fax I sent. They are calling and mailing me multiple times (this check was for under $25. when the total amount of checks so far is up to $6,000. What can I say to them to get them to leave me alone?
My lesson, of course, is never leave puse in car (in church parking lot) and not to carry checkbook in purse.
@katherine Not sure exactly what is going on, but i suggest you mail things registered so that you have confirmation they received it and how received it.
Second Maybe talk to a lawyer in your area? I am not exactly sure what is going on and how a $25 bill went up to $6000.
Hi
My name is Ali and more than 10 years ago I recived tiket for selling HOTDOG in the city propert and not having licence to sell food. (about 1700.00)
and now I reciving call from colection agency regarding my tiket, he is telling me : CIty is owne by CROWE (E2) and there is no statute limitation, But I do NOT see any thing in my cradit report.
What should I do? Who sould I belive?
Ali Norouzi
North Bay, Ontario
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