If you have fallen behind on your credit card payments, you can expect a phone call. OK, you can expect a lot of phone calls. If you are going to attempt to deal with the debt collector on your own, remember that you are going head-to-head with a tough professional that does this everyday for a living.
It pays to know your rights. Keep a detailed record of all of your communications when you speak to them. Note the time and date of the call, the person that you spoke with (get their ID number if they have one) and everything that they said.
Before talking to any debt collector, review the Fair Debt Collection Practices Act. This is a general "rule book" that the creditors have to play by. Follow this link to better prepare yourself for battle. www.ftc.gov/bcp/conline/pubs/credit/fdc.htm [http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm]. Many states also have their own "rules of engagement" that you should know. You can find out more about what your state allows a debt collector to do by contacting your local attorney general's office. Just do a quick Google search; attorney general California debt collector (for example) and there will be a direct link about that States Fair Debt Collection Practices Act.
After you have beefed up on the FDCPA, here is what you should do next:
Prioritize your bills. -
No matter what a debt collector says, when you are having financial difficulty, the most important bill to pay is not your credit card bill. Providing for your family comes first. You need to make your mortgage, vehicle, utilities and insurance payments. Provide for groceries and other life essentials as well. If you don't make your mortgage payments, you run the risk of losing your home to foreclosure. If you don't make your vehicle payments, you run the risk of having your vehicle repossessed (not to mention that in most cases, you won't be able to get to work to make money to take care of your bills). Not eating and skipping required medications is not a good idea for obvious reasons.
If you don't make your credit card payments, they would have to sue you first before they could do anything to you. This process will normally take several months to get to. They can't garnish your wages or put you in jail or whatever other things a debt collector will say to get you to pay them right away. So remember, take care of your family and your most important bills first.
Estimate how much you can afford to pay. -
Once you have your priorities taken care of, figure out how much you could afford to send to the debt collector and offer them less. This way if anything does happen that you didn't expect, you don't put yourself in a further bind. In addition, if they reject the lesser amount, the amount that they want may be what you can still actually afford.
Never send a debt collector any postdated checks and never agree to automatic electronic payments for your checking account. Remember, they do this for a living folks. They may say that in order to accept such a payment, we would have to have post-dated checks or we need to have this taken from your checking account. Tell them no. This is what I can afford and I can send the payment out to you each month on (give them a date that you can stick with).
Once they have the postdated checks in hand, they can cash them. Once they have access to your bank account, they can continually take money out. Not to mention that they now have your banking information, etc.
Don't start in with your life story, they don't care -
How many people do you think they talk to each day? They have heard it all. It's not that they don't feel for you. But quite frankly, their job is to collect money from you. That is how they feed their family. If you are at the stage where a debt collector is calling, stick to the facts and make them a payment offer that you can afford.
Control what information is communicated -
Don't give a collection agent any personal information. Don't tell them where you work, where you bank or your checking account number. When they start off the call by saying, "I just want to update or confirm our records; can you confirm your work number or bank account information"? Don't tell them. You can be polite and say, I'm sorry, what can I help you with? The more that you remain in control, polite but firm, the better chances you will get what you want out of the negotiation. The more private information you give them, the easier it will be for them to pursue you if you can't work something out.
Putting it simply, if you have to go through the process of suing someone, would you spend your time going after someone that you had very little information on (don't know their banking information, where they work or even if they are working, etc) or someone that you could easily follow-up on to get your money? So, control the information you provide, don't give up personal information and remain polite but stick to the task at hand. The more in control you are, the more likely you will be successful.
Tape the call if you can -
State laws vary for taping a phone conversation. Most of the States require "one party" consent, meaning you. Other states require "two party" consent, meaning that you have to tell the collector that you are recording the call. If you want a safe bet, tell the debt collector that you are recording the call. If they continue to talk, they have given their consent. If they are offended or get pushy, simply tell them that you are very concerned about the account and you want to make sure that you don't forget anything important. Who could argue with that? Someone that doesn't want to get caught violating the FDCPA I would think....Violating the FDCPA can come with some stiff penalties, not to mention you may be able to sue them. Heck, you may end up having them owe you money. No joke. I've seen it happen may times.
Get proof of payment/settlement agreements in writing, before you make a payment -
If you are lucky enough to negotiate a full settlement of the debt by the debt collector taking less that the full amount owed, get the agreement in writing before you make the payment. If you and the collector agree to make smaller monthly payments towards your obligation, get it in writing. No matter what the deal is, get it in writing. Sorry, did I mention that you need to get your deal in writing before you make any payments?
If you are settling your debt in full by making a payment, send the payment out, along with a copy of the settlement letter, by certified mail. This way you will have a receipt. If you are paying by check, make sure to write on the check that "Cashing this check constitutes payment in full."
Negotiate at the end of the month -
Remember, debt collectors feed their families by collecting money from you and they are usually paid on commission. So, negotiating at the end of the month may get you a better deal than at the beginning of the month.
While you are at it, repair your credit -
While you are negotiating with the debt collector, have them agree to remove any negative information that they may have reported to the Credit Bureaus (Trans Union, Equifax and Experian). They may have reported the late payments or charge offs, all of which will effect your FICO score and the ability to obtain future credit with favorable interest rates. At the very least, have them agree to report that the debt was paid in full as opposed to settled. Remember, get it in writing and if at all possible, get it written up as part of the settlement agreement with them.
Don't be rushed -
Most debt collectors are pushy people. They need their commission checks. They will say the "offer is only good for today" or "we need the payment overnight". Do not send them any payment until you have an agreement in writing. You need to have the agreement in writing to protect yourself. Tell them great, if you can get me the agreement today, I can make sure we get this resolved. Put the onus on them to perform what you need in order for them to get what they need.
Get professional help -
Negotiating with a creditor can be a daunting and intimidating task. The saying "what you don't know, can't hurt you" does not apply here. Actually, what you don't know can really hurt you and could cost you a lot of money, time and aggravation.
You are going up against a trained professional and let's face it, you're not. Fortunately for you, there are companies out there that are and that will work for you to get you the best possible deal. These companies not only understand the process but, they have the ability to combine your account with hundreds of other individual accounts, resulting in very big settlement offers with the creditors.
If you owed MBNA $6,000 and you were negotiating with them for a settlement, they may look at taking 80%. What do you have to negotiate with? You think that the $6,000 is going to hurt them? Not individually and not likely. However, what if MBNA was presented with a combined total of $750,000 that is owed? They could literally settle 125 accounts all at once. This saves them time and money. No more letters, phone calls, law suits for each individual account, etc. They get to clear off all of those accounts and put their collection army elsewhere. Most often than not, it makes more sense to have someone else negotiate on your behalf.
A good Debt Settlement company also tracks current trends in the industry and knows if any creditors are in need of cash or are offering specials. So you understand a little bit more about the process, within the credit industry, there will on occasion be special offers. For example a creditor may normally settle debts owed to them for .50 cents to the dollar. However, they may have had a weak quarter and in order to boost up revenue/prevent additional charge offs, etc., they will grant settlement offers for .33 cents on the dollar. You won't know about it, but your negotiator probably will. In addition, most established Debt Settlement companies already have established settlement amounts with creditors based upon the volume of their client base.
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