My last blog entry was about saving. I hope you were able to come up with your own serious savings plan. Remember: ‘Set a Goal, Make a Plan, Save Automatically.’ (Oh, and thank you for the suggestions on how to protect my Jelly-Bean Coin Jar. so far so good)
Now we’re going to make the jarring transition from saving to dealing with debt. Specifically I’m going to delve into the murky world of debt collection and how you can deal with and overcome it. Give me a second while I put on my HazMat suit to protect me as I wade through some of this gunk.
Alright, first up, confession time (again). I was almost sued once for a past due debt (not another proud moment for me). I’ll spare all the details, but the short version is a very messy mix up with an allergist office (and a hardheaded and prideful stance on my part). I thought I was just testing for allergic reactions. The office thought I wanted three times a week allergy treatments. I ignored bill statements in the mail and phone calls because I never went to appointments. In my mind, I didn’t owe anything (since I never went to any appointments).
It was the court summons that humbled me. I was being sued for $1200. I promptly called and settled for $700.
When you miss a payment, the company will most likely report that to the credit bureaus. That’s how late payments show up on your credit report.
A few months of missed payments will normally trigger the company’s internal collection department who will send you letters and call you to remind you to pay.
After about 120-180 days, if you are unable (or unwilling, as I was) to pay, then your debt is packaged with other uncollected past due debts and sold to a debt collector. At this point, on your credit report, your debt is considered charged-off. The debt legally belongs to the debt collector. If and when you want to resolve the matter, you will have to do so with the debt collector.
Lets talk a second about the debt collector. Most debt collectors are trying to make an honest living. It’s the small percentage that gives the industry a bad name and a murky reputation (ergo my HazMat suit). Debt collection is a thankless job. When is the last time anyone was happy to hear from a debt collector? It’s also a short-lived job for most collectors as they typically work for a minimal salary with some commission for collections.
Since most of us avoid conversations with collectors, they tend to have to move quickly when they finally do reach us. The actual act of collection turns into an emotional challenge, game if you will, as many debt collectors are trained to find your weak spot (fear, anxiety, anger, shame and guilt) regarding your debt. If they can elicit an emotional response from you, they may be able to get a payment from you.
I’m not making any excuses for their actions. I have dealt with some pretty nasty collectors. Here are some things I’ve directly experienced while helping clients:
1. Debt Collector: “You’re stupid!” (told to immigrant client who’s thick accent made it hard to understand her English)
2. Debt Collector: (To client’s request to speak to his Supervisor) “I am the Supervisor. And right now I control whether you’ll ever have access to credit again.”
3. Debt Collector: (To client’s child who answered collection call) “We’re sending the police to take away all your toys because your Daddy didn’t pay his credit card.”
These are edge cases, for sure. However, the stress and pressure exerted can be just as bad as these direct statements. You may have a few stories of your own on this front. I hope you’ll share them in the comments section.
So what are your rights? Have you heard about the Fair Debt Collection Practices Act (FDCPA)? This is the statute that governs the actions of debt collectors and clearly defines your rights. This is worth five to ten minutes of your time to review.
Specific collection practices that are illegal include:
– You can’t be harassed. They can’t physically threaten you or curse at you. They are not supposed to embarrass you by publishing your debt or calling your employer or relatives.
– They can’t call you at inconvenient times (including at work when you’ve told them not to call you there).
– They can’t claim to be lawyers when they are not (and scare you with threats of lawsuits).
– They can’t threaten to arrest you.
– They can’t give false information to credit bureaus.
– They can’t seize property or tell you they will garnish your wages or attach property (unless they’ve gone through the court system and won the right to do so).
According to the FDCPA, you have a right to:
– A written notice telling you the amount of the debt, the name of the creditor and the actions you can take if you believe you don’t own the debt.
– If you give a debt collector money to make a payment on a specific debt, the money must be applied to the debt as you instructed. A debt collector can’t apply your payment to a debt you believe you do not owe.
– Only be contacted during reasonable hours (between 8:00 a.m. to 9:00 p.m. local time, your time. not theirs). And if you tell them to cease calling (especially in written form), they are supposed to stop.
Want more insight on your rights? The Federal Trade Commission has a host of resources regarding the FDCPA.
Be sure to check out Part 2 of this blog series”Got Debt? Here’s How to Keep Your Dough“