When you receive a notice in the mail that you owe a debt, it’s best to pay it as agreed. Sometimes, that doesn’t happen, and you end up behind the game. Other times, you may not even know about debt until a debt collector calls you. What do you do then?

About Debt Collectors

A debt collector is typically an in-house or a third-party organization tasked with getting you to pay the debt you owe to a lender. Often, companies turn to debt collectors like this because the consumer hasn’t made payment within 30 to 60 days, and the debt is late.

Debt collectors may work to encourage you to pay what you owe, but U.S. federal law protects consumers on how they can do that. For example, debt collectors cannot lie to you, exaggerate what you owe, or threaten you in any way. While you may not want to pay them back, if the debt is valid, your lender can try to collect on it.

How a Debt Goes to a Collection Agency

A debt collection agency is most often a third-party organization that purchases the debt you owe from a lender. Let’s say you owe a dentist $800. The dentist sells your debt to a debt collection agency, often for pennies on the dollar. That means you now owe the debt collection agency for the dentist’s balance.

Most of the time, this happens when a person is 60 or more days late on the payment they owe. The lender cuts their losses by selling the debt to a debt collection company for less than you owe. However, you are still obligated to pay the total amount owed. It is essential to consider that debt collection actions are legal. However, you also have the right to fully understand your financial obligations, what you owe, and what the debt includes.

Dealing with a Collection Agency

Debt collectors will provide you with information about what you owe and outline options for payment. However, remember a few things when dealing with them.

• Be sure to check your credit report. You don’t want this on your credit report. If possible, set up payments with the debt collector before they report to the national credit bureaus. Alternatively, ask them not to do so if you pay in full.
• Be sure you truly owe the debt. If you don’t recognize the debt or are unsure that the amount is accurate, require the debt collector to prove that you owe it. They must be able to show what you owe, and they have to do it within a short amount of time. State that you want them to prove the debt is valid and within the statute of limitations set under state law.
• Do this within 30 days of receiving your first collection notice.
• Don’t feel abused or at risk. If you do not feel like the debt collector is mistreating or harassing you at work, contact the FTC. The key here is to know your rights as a consumer.

Steps to Take

What do you do when you receive a debt collection notice? Here’s how to proceed to protect yourself from such claims.

• If someone calls you with a debt collection request, ask them to send you all the information in writing. Don’t verify anything with them. Don’t provide them with any additional information.
• Verify that the debt is accurate. If you don’t recognize it, send a notice to the debt collector within 30 days of receiving the debt owed notice requiring them to prove it is valid.
• Verify that the debt payment is within the state’s statute of limitation. You can do that by checking the attorney general’s website. The lender cannot take legal action if it is beyond this date.
• Negotiate the valid debt with the debt collector. Ask for payment within your budget and possible discounts or lowered amounts.
• Make the payments you owe if you can do so.
• If you don’t owe the debt, send the company a Cease and Desist Letter outlining this.

Protecting Your Credit Score

A debt collection agency on your credit report can be harmful, and you’ll want to avoid it whenever possible. If your initial lender reports the debt as a chargeoff, that will hurt you. However, not all debt collection agencies will report debts to the credit bureaus, and some may agree to remove the information from your credit report if you make payment on time. Be sure to check your credit report often.

Seeking Help from a Debt Counselor or Attorney

You may need help from a professional to manage debt collections in many situations. Contact a debt counselor or an attorney if you feel a debt collector violates your rights.

Avoiding Debt Collections

Whenever possible, try to avoid working with debt collectors. To do that, you must try to make monthly payments on time. If you fall behind on your payments, contact your lender up front to let them know you need some help. Lenders often work with you to avoid losing money by sending the debt to a third-party collection agency. If you ignore them, though, that’s not going to happen.