Don't Be Afraid of the Big Bad Collections Agency

Posted 4/29/2010 1:59:41 PM in Collections
Nobody likes having to deal with a collections agency. Their single minded desire to get money from you can lead to persistent phone calls and threats which only compounds the embarrassment or frustration of having a debt sent to collections on the first place. And on top of that, one of the tools a collections company has at their disposal is the ability to destroy your credit score, something they are more than willing to do in order to get your attention.

Having a debt sent to collections is something to be avoided, but it is not the worst thing that could happen to you. If you take some time to learn a little about collections companies, research your consumer rights, and take care to keep your wits about you, you can make the best of the situation.

Here are some things to remember when dealing with a collections agency:

1) Collections agencies care about getting their money, not about your credit score.

This may seem counter-intuitive given the fact that collections agencies report to the credit bureaus, but since a collections company is not a lender, they could care less how "accurate" your credit score is. They add negative items to your credit reports in order to coerce you into paying your debt, not to help others determine your credit worthiness.

This is important to remember because a collections agency may be just as willing to remove a collections listing from your account as they are to add it if you give them the proper incentive. If you have unpaid collections, try negotiating a payment for deletion. You may find that collections agencies are perfectly willing to delete the negative listing they added to your credit reports in exchange for payment.

2) Collections agencies buy debt for pennies on the dollar.

When a debt is purchased by a collections agency, the original creditor has written off the loss and sold the debt for around 10% of its original value. While this does not mean the collections agency cannot hold you accountable for the whole amount, it does give you room for negotiation.

If you have unsecured debts sent to collections that you are unable or unwilling to pay off, you can try to negotiate for a lower payment amount. Given that a collections agency only needs to bring in a fraction of the total debt amount to profit from your account, experts suggest starting out at 25% of the total value of the account when starting your negotiations and don't forget to see if you can get them to remove the negative listing from your credit reports as well.

3) Working in collections is usually not a very desirable this to be doing.

The people you will probably be dealing with don't consider collections a career or are not necessarily the most upstanding members of the workforce. Turnover is high within collections agencies and you can't expect anyone to take a personal interest in your case.

Because of this, you can't take anything for granted. Make sure you document everything and when possible, only communicate via written correspondence. It will do you no good to arrange a pay for deletion or a settlement over the phone if it is not documented. After you make your payment, if the collections agency does not uphold their side of the bargain, it is just your word against that of a call center agent who may not even be with the company any more. If that happens , not only did you not get what you worked for, but you've lost leverage.

Get all agreements in writing and if you have to conduce any business over the phone, take copious notes that include the name of the people you talk to as well as each person's supervisor.

4) You have certain legal rights when dealing with collections agencies.

We're not going to get into a full discussion of these rights here, but bear in mind that there are certain rules collections agencies must abide by when dealing with consumers. By knowing these rights, you can protect yourself from abusive collections practices and in some cases force the collections company to stop attempting to collect on the debt and stop reporting it to the credit bureaus.

More information about your rights with regards to collections agencies can be found here.