9 secrets your debt collector doesn’t want you to know

by Allison Martin

Owing on balances you can’t afford is bad enough, so the last thing you need is a debt collector hounding you about it. And don’t think for one minute that they’ll cut you any slack. These folks are in it to win it, and they want to make as much money as they can.
Unfortunately, many take unfair and illegal advantage of debtors because many debtors lack basic knowledge about their rights. To avoid falling for collectors’ traps, you must understand the Fair Debt Collection Practices Act. The Federal Trade Commission explains some of your rights here.
Here are nine little-understood facts your debt collector doesn’t want you to know:

1. You are not obligated to communicate with collection agencies

Tired of receiving the phone calls and letters from pushy collection representatives urging you to pay or else? You can stop those companies dead in their tracks with a cease-and-desist letter.

But understand that they may pursue legal action if you do so. And the agency has the right to notify you via mail of the termination of collection efforts or their intention to turn to the court system for assistance, if applicable.

When a debt collector initially calls, don’t ignore it, and don’t ignore any summons to appear in court about the debt. In that first call or in a follow-up letter, the collector must provide details about the money you supposedly owe.
After that, the Consumer Financial Protection Bureau says:

If you dispute a debt (or part of a debt) in writing within 30 days of when you receive the required information from the debt collector, the debt collector cannot call or contact you until after your dispute has been investigated and the debt collector has provided the verification of the debt in writing to you.

You can also request that the creditor give you the name and address of the original creditor. If you make that request in writing within 30 days, the debt collector has to stop all debt collection activities until the debt collector provides you that information.

If the debt collector reaches out to you before the investigation is complete or starts to harass you about the outstanding balance, they may be in violation of the FDCPA. You can file a complaint with the attorney general’s office in your state, the Federal Trade Commission or the Consumer Financial Protection Bureau. Or you may be able to get free legal help.

2. You don’t have to disclose personal information

There is no law mandating the disclosure of identifying information, such as your Social Security number and your date of birth, to debt collectors. They may insist that it’s required to verify the debt, but it’s not.

3. Paying off an account in collections won’t wipe it from your credit reports

That account in collections will remain on your credit reports for seven years, FICO says, even if you pay it in full.

How to Deal With Debt Collectors Play Video

However, when you negotiate with the collections agency to settle the debt, either by full or partial payment, you can ask that they have the debt removed from your credit reports. If they agree, make sure you have that in writing from them before you pay it off. (See: “Ask Stacy: Can You Help Me Clean Up my Credit History?“)

4. Your assets are not at risk, yet

During the collection process, the representatives are allowed to bug you, with limits, in an effort to collect on the delinquent account. But they cannot garnish your wages unless a judgment is issued in court.
That doesn’t apply to all debt. For instance, the federal government does not need a court order to garnish your wages for student loan debt.
The rule doesn’t apply when you fall behind on your mortgage or car loan. In some states, no court action is required to foreclose on a house. And the repo man doesn’t need a court order to take your car.
Take a look at Nolo’s article to get an idea of which of your assets may be at risk.

5. You may not have to fork over a big chunk of cash immediately

The debt collector wants the largest possible amount it can get from you to beef up its earnings. But you may be able to set up a payment plan that fits within your budget.
Just remember that the collector is not legally required to agree to a payment plan. But you can ask.

6. You may be able to negotiate the best deal at the end of the month

It turns out, you may be able to score the best deal with debt collectors toward the end of the month. Fred Williams, a former collection agent and author of “Fight Back Against Unfair Debt Collection Practices,” told Daily Finance:

I think most agencies go on a calendar month schedule. The end of the month is when collectors’ bonuses are determined. In addition to the increased threats made because they were under pressure to make their quotas, that’s also the time to get a deal because they’re under pressure to bring in the money quickly. They want a settlement, cash in short order. The end of the month is a time to close the deal.

7. You may be able to work with the original creditor

In some instances, the original creditor will be willing to work with you to collect the amount owed. However, if it has already sold the account to a third-party debt collector and charged it off in the books, you’re left with only one option. And that’s working with the debt collectors.

8. Your delinquent debts are nobody’s business

Unless you have spouse or co-signer, or an attorney working on your behalf, debt collectors must keep their lips sealed about your outstanding balances. And if they reach out to others in an effort to locate you, all contact with those people must cease once you are located.

Consumer lawyer Sukhman Dhami told Credit.com:

We call these “third-party disclosures,” a violation of Section 1692c(b) of the Fair Debt Collection Practices Act, and they are exceptionally common, particularly when the debt collector leaves a message on a public answering machine. These public answering machine violations are called “Foti” violations after the landmark case Foti v. NCO Financial Systems.

9. You may be off the hook

Debt collectors probably won’t tell you this, but once the statute of limitations on debt in your state has lapsed, you’re off the hook, although that likely won’t stop them from trying to collect the money. Atlanta bankruptcy lawyer Jonathan Ginsburg told Credit.com:

“In most states, the statute of limitations runs four to six years from the date you last made a payment. And that’s the catch. In some states, a voluntary payment on a stale debt can revive the debt and make it legally collectible. Stale (or zombie) debt is big business,” he adds.

Money Talks News finance expert Stacy Johnson added this advice:

Keep in mind that after the statute of limitations expires, unless the debt has been charged off or discharged in bankruptcy, you still owe the money. In other words, the statute of limitations doesn’t wipe out the debt, it just reduces the legal remedies available to collect it.

So if you find yourself in this situation, the smart move is to call a consumer lawyer (you can find one at the National Association of Consumer Advocates’ website) and ask the attorney what to do.

Another word of advice when dealing with debt collectors: Never fess up until you have confirmed the validity of the debt and the authenticity of the collection agency.