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.

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

Collection Agency Help

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?



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.