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It’s easy to get behind on paying the monthly bills. The economy may have slowed your ability to generate income, your investments may have dwindled, or perhaps you had an unexpected home repair or medical emergency that ate away at your savings.
Handling Debt Collection Harassment: Legal Strategies From Kansas Attorneys
If you miss payments for 3-6 months, you can expect collectors to call and demand money. If you don’t want to hassle for a few months (but it could be a few years), one alternative to consider is a consolidation plan that could solve the situation without dodging the collectors’ calls.
How Does Debt Collection Work?
However, if you do not settle within 180 days, creditors find another company or an affiliate company to collect the past due amount. Sometimes a collection agency will agree to collect these in exchange for a fee or for a percentage of the money collected as payment. Other times, a third party will buy yours from the creditor for less than you owe and then attempt to collect the full amount.
Collectors, as the name suggests, are in the business of finding people who haven’t paid their bills and convincing them to make good on the s.
Miss some payments on credit cards, student loans, medical bills, mortgage, cell phone service or a reverse car loan and there’s a very good chance you’ll hear from a collector demanding money, in fact, you’ll probably hear from them quite a few Sometimes, either by phone or by mail, because when you pay, they get paid.
Collections is a $13 billion industry with more than 40,000 workers chasing those who have fallen behind on their bills. One in three American adults — 77 million people — have credit files showing collection, according to the Consumer Finance Protection Bureau (CFPB).
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The CFPB says the average is $5,178 and trends suggest that number will get higher. Credit card debt was at $918 billion in October 2015 after dropping as low as $840 billion in 2010. The surge is even greater in the student loan industry, where the delinquency rate is 27.3 percent on all loans in repayment, according to the St. Louis Federal Reserve and total is $1.3 trillion.
That’s a lot of uncollected money and a good reason over 6,000 companies are in the collection business.
Creditors are defined as businesses or individuals who are owed money. They are the company that extends credit or a loan with the expectation that they will be paid back. When creditors do not receive payment over a period of time, at least 90 days in most cases, they often hire another company to chase the past due amount. The company they hire is a collection agency.
Collection agencies follow these and receive a percentage of the amount they collect. The arrangement accounted for about half ($6.6 billion) of the industry’s revenue in 2014.
If A Debt Is Sold To Another Company Do I Have To Pay
The other popular move is for the collection agency to buy it from the creditor and try to collect the entire amount, or some profitable portion, themselves. The Federal Trade Commission’s 2013 survey showed collection agencies paid the original creditor an average of just four cents on the dollar for . They may sell that again to another collection agency.
The constant sale and re-sale of s has created doubt as to whether the information sold is accurate. These are sometimes re-sold so many times that parts of s already can be settled and information about the source and amount left is questionable.
While some collectors are cordial, others resort to harassing phone calls, threats and foul language to intimidate consumers and make them pay immediately. This brings even more pressure to what is already a difficult time. It is important to know your rights as a consumer. You should be familiar with the collection process, as well as how collectors can garnish wages. It’s important to understand the collection practices that collectors don’t want you to know so you can be prepared to fight back.
First and foremost, you will have to answer directly to your creditor. For about half a year after your bill becomes overdue, a collector at the lending company will contact you about it. If you don’t take care of it during this period, your creditor will likely sell it to a third-party collector. If this happens, you will owe the collection agency directly rather than owing your original creditor.
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Owing to a collector tends to complicate the issue; More laws come into play, and collectors tend to be more aggressive in their collection practices. Whenever possible, it is advised that you try to settle your debts before they are handed over to collection agencies.
As soon as a collection agency starts contacting you about a , confirm this before taking any other actions. If you believe it’s for a different amount, or if you believe you don’t owe it, the process of collection arbitration can help you clear the air.
Within five days of your first contact from a collection agency, the collector must send you a written notice that lists the amount owed and the name of the creditor to whom money is owed. If the information is incorrect, notify the agency immediately and do not pay any amount.
If collectors still refuse to stop calling you, you may need to start collection arbitration. This is a means to settle disputes fairly by using a third-party arbitrator.
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Collect as much evidence as you can to show that you do not owe the one in question. This can include things like receipts, contracts and account summaries. The arbitrator will listen to your case and the case of the collection agency, review all documentation about the loan in question.
After hearing from both sides, the arbitrator will decide on a rule. If he or she thinks you owe the , the collector or creditor will bring the decision to a court for confirmation. The court can order you to pay the collections and can issue a restraining order against you.
If your account is severely past due, your creditor or collector may request that a judge issue a garnishment order against you. With this, the company can garnish, or collect, money owed directly from any income such as wages, bonuses or pensions. This means that a portion of your earnings will go towards repaying you until the full amount is satisfied.
Creditors can only garnish a certain amount of your earned income, ensuring that you are left with enough of your paycheck to cover basic living expenses. There are also certain types of income, such as child support, that are immune to garnishment.
How To Prove A Debt Is Not Yours (and Dispute It)
Collection agencies tend to be aggressive during every step of the collection process. Some commonly used collection tactics such as harassment are illegal. Therefore, it is vital to review your rights, which vary by state, so you can recognize and report when a collection agent is breaking the law.
The nation’s consumer protection agency, the Federal Trade Commission, enforces the Fair Collection Practices Act, which advises collectors of abusive, unfair or deceptive practices. This act covers personal, family and household debts, including money owed on car loans, medical bills, credit cards and mortgages.
You also have a right to privacy, so when you get the first phone call, tell the collection agency that you want all future contact in writing. Put your request in writing and say you want to be the only person contacted about the , as some collectors will attempt to contact employers, friends, neighbors and family members.
Be sure to make a copy of the letter and send it by certified mail. Pay for a “return receipt” so you have documentation that the collector received it.
Highly Effective Debt Collection Call Scripts
If a collector harasses you and does not stop illegal actions on a written request, you have the right to fight back. You can file a lawsuit in state court or federal court within a year after the law is broken. If you can prove the violation and win, the judge can make the collector pay you for damages you suffered, as well as your attorney’s fees and court costs. It is important to remember the will not go away without payment, even if the collector violated federal law.
Members of the military should contact their local judge attorney general’s office if they are contacted by a collector. Another federal law, the Servicemembers Civil Relief Act, provides protections for those who are in the military and whose financial lives are affected by service.
Since many states have