Nobody likes to see a debt collector’s number on their Caller ID. It’s even worse when the consumer knows that they can’t satisfy whatever bill the creditor wants to collect.
However, if you’re receiving collection calls, know that you aren’t alone. According to a 2015 Pew Research Center report, “The Complex Story of American Debt,” 80 percent of Americans have debt. More importantly, more than 40 percent of millennials are beginning their careers with student debt, and most people belonging to Generation X owe about $100,000 in debt.
It’s a common problem for Americans, but how do you handle the situation when it arises?
What Are Collection Calls?
A collection call is when a debt collector calls a consumer to inquire about an unpaid debt or a past-due payment.
For instance, let’s say that you financed a car last year. You owe $350 each month to the creditor, but you missed last month’s payment. The finance company will likely place a debt collection call to ask you to make the payment or to create other arrangements so you can satisfy the debt.
The same can hold true for other types of debt, including:
- Mortgage payments
- Credit card debt
- Monies owed on services, such as utilities
- Unpaid medical expenses
When a debt collector calls, they must identify the reason for the call and explain exactly what you owe. You might be asked to verify personally identifiable information, such as the last four digits of your social security number or your date of birth. Don’t supply that information unless you’re sure you’re speaking to someone who genuinely has a reason to call you.
After verifying your identity, the debt collector will probably try to work out a payment plan.
Creditors want to get paid—that’s the bottom line. If you’re late on payments, they would rather work with you going forward than write off the account as a bad debt or repossess something you own, such as your car. Repossession costs money, which is added to the unpaid balance.
Knowing this can give you an advantage. You might feel tempted to ignore the debt collector, hoping they go away, but you’re better served by taking the call and working with them to come to a mutually agreeable arrangement.
Keep in mind not all debt collectors are the same.
For instance, you might hear from the original creditor. If you’re only behind one month in your car payments, as described in the scenario above, you’ll probably hear from the financing company that helped you buy the car. In other words, the company is using its in-house financing department to attempt to collect the debt.
As an account ages, a business might refer it to a third-party collection agency. In this case, you’ll speak to someone who has been hired to collect what you owe. They still have negotiating power; you might be able to come to a settlement or payment plan that works with your budget.
Finally, you might encounter scavenger debt collectors. These are companies that buy extremely old debts for pennies on the dollar. They sometimes use threats of legal action to get people to pay, and they often offer steep discounts off the originally owed amount.
In most cases, you’ll want to dispute this type of collection attempt. Scavenger debt collectors often buy debts after they’ve already existed on a consumer’s credit report for more than seven years, at which point the debt should drop off.
When and Why Do You Get Collection Calls?
Collection agencies use skip tracing to find contact information for people they want to speak with about an unpaid debt. They might uncover your place of business or the phone numbers for known relatives and friends.
Fortunately, you can ask debt collectors to only contact you via a specific medium and at a specific time. The Consumer Financial Protection Bureau, the U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly, requires them to obey your wishes. If a debt collector harasses you—at work, for example—after you’ve explicitly made your request clear, you can file a complaint with CFPB.
Debt collectors, can only contact you at reasonable hours. If you hear from a collection agency at 3 a.m., for example, the company is violating the Fair Debt Collections Practices Act and should be reported. Additionally, after you let the agency know you don’t want to receive any more phone calls, they have to abide your wishes.
However, keep in mind that most collection calls are legitimate. You’re receiving calls because you failed to make a payment when it was owed, so you’re better off dealing with the problem instead of ignoring it. Failing to satisfy a debt can damage your credit report and make it difficult for you to get credit in the future.
A poor credit score can prevent you from getting a smartphone contract, internet service and even an account with the local electricity or water company.
To avoid those eventualities, deal with the debt as quickly as possible. The faster you get out of debt, the easier it becomes to create a healthy financial future.
What Can You Do About Collection Calls?
When you receive collection calls, start thinking about paying down your debt immediately. If you’re proactive about eliminating the debt on your record, you won’t have to worry about inconvenient calls and other issues arising from unpaid debts.
- Set up a payment plan. Ask the creditor to agree to a payment plan that works within your budget. Only agree to pay what you can; if you default on a payment plan, the creditor can pretend it never existed.
- Consider selling assets you can’t afford. If you can no longer make the payments on a luxury car lease, consider returning it to the dealership and choosing a less expensive vehicle. You might lose a few bucks in the deal, but at least you won’t feel burdened with debt you can’t afford.
- Examine your budget closely. Where can you trim a few dollars here and there? Can you pick up a second job? Can you hold a yard sale to generate a few extra bucks?
- Recognize your limitations. Sometimes, debts get acquired through no real fault of your own. For instance, if you lose your job or get sick, you can’t help the resulting financial chaos. Instead of spiraling into depression, recognize your limitations and resign yourself to dealing with the situation in front of you.
Of course, you don’t want to take any of these steps until you verify the debt. Ask the creditor to send you, by mail, proof of the debt and any documentation they have. That way, you can check the data against your records. Unfortunately, incorrect assessments have become common, and you don’t want to pay any debts that you don’t owe.
Additionally, know that debt collection scams abound. Just because someone tells you that you owe them money doesn’t make it true. Never provide any information that a potential identity thief could use against you.
If you’re struggling with calls from debt collectors, remember you’re not alone. Millions of these calls go out of every year, and you’re not the first person to miss a payment or forget to pay a bill. It happens.
The important thing is to get on top of the debt and make sure you don’t have to suffer from a blemish on your credit report.
The views and opinions expressed here are those of the author and do not necessarily represent the views of Green Dot Corporation.