When you have a lot of debt, you can find yourself at breaking point when debt collectors are practically knocking at your door, calling your phone non-stop, and demanding that your pay their bills. However, there’s a right way and wrong way to handle a debt collector. We’re going to dive deep into common mistakes that consumers make when dealing with debt collectors.
#1 Never send a post-dated check.
Many debt collectors will encourage you to send a post-dated check for the amount you owe. However, many consumers don’t understand the liabilities for signing a post-dated check. If you provide a postdated check and for any reason that check is returned by the bank for ‘non-sufficient funds,’ it may be considered fraudulent and put you ask risk for both civil and criminal penalties.
UCC Subsection 4-401 states that “a bank may honor an otherwise properly payable postdated check before its date unless the customer has given the bank reasonable notice of the postdating.” So if you write a post-dated check, the debt collector could cash it before the agreed date if the bank has not been formally notified of the postdating. Fair Debt Collection Practices Act does not allow a debt collector to accept a postdated check by more than five days unless the person is notified in writing of the debt collector’s intent to deposit the check not more than ten nor less than three business days prior to such a deposit.
So if you didn’t read the fine print or don’t have funds in your account within that window, you could be putting yourself at risk by agreeing to send a post-dated check.
#2 Avoid signing up for up for electronic payments.
Debt collectors will encourage you to setup automatic electronic payments. However, if your income isn’t stable or your bills change from month to month, you might find yourself committed to a payment that you’re not capable of paying. Even if you notify them of your troubles, prior to the withdrawal date, it may not be enough time to cancel the payment. It’s always better to make payment arrangements, and follow a set schedule then commit funds that are not already in your bank.
Never put yourself in a position where you have to pay your debt above your family’s necessities.
#3 Don’t discuss your personal troubles with the debt collector.
Debt collectors are not going to be sympathetic to your troubles, so avoid going into a lengthy explanation of how you got into debt and why you can’t pay. Avoid getting into conversations that will upset you, and get you off topic. Control the information flow, stay calm, and stay on task. You’re less likely to agree to a poor deal if you’re keeping a clear head.
Focus on finding a financial solution, not the situation that got you there.
#4 Don’t volunteer your work phone number.
If you don’t want the debt collection agency calling your work, then don’t give them your work number. Under the Fair Debt Collection Practices Act a debt collector may not contact a consumer at the place of their employment if the debt collector knows or has reason to know that a consumer’s employer prohibits the consumer from receiving such communication.
If you give them your work number as an alternate contact number then you’re implying that it’s fine to contact you there.
#5 Don’t take their word on anything.
Whenever in doubt, get it in writing. Keep clear records of your conversations with your debt collectors, including date and time of each call, the name of the collection agency, the name of the debt collector and what was said. Keep it in a file with all the letters you received from the agency. If you reach a settlement agreement, get proof of the payment agreement in writing. If you send any correspondence to the debt collector, send the letter via certified mail.
On your final payment, make sure that you write on the check the following disclaimer, “Cashing this check constitutes payment in full.”
#6 Don’t let them rush your decisions.
Debt collector will try to rush you to pay immediately, and to a set amount. If you don’t know what you can pay, don’t make any agreements. Do your budget first. Know what you can and can not financially afford. Take your time making a decision. Once again, don’t make any payments until you have the agreement in writing.
If you can time your negotiations at the end of the month, you may get a better deal. Many debt collectors work on commission, and are pushing at the end of the month to fill their quota.
Lastly, make sure that you know your rights. Consolidated Credit Counseling Services has extensive experience negotiating with creditors. We have additional resources on consumer rights.
About the Author
The following post is from Kathryn Katz, a Certified Personal Finance Counselor who works for Consolidated Credit Counseling Services in Ft. Lauderdale, Florida. Their non-profit agency helps families through financial crisis using credit counseling, debt consolidation and financial education.