Before You Pay a Debt Collection

In 2011, the FTC received almost 181,000 complaints against debt collectors - the third parties who collect debts for banks and other businesses. It goes without saying that debt collectors don't always follow the rules. Knowing your rights can help you decide whether to deal deal, or not deal, with collection agencies.

Do you know what a debt collector is?

When banks have trouble collecting payment from debtors, they hire a debt collector (who works for a collection agency) to collect the debt. Debt collectors must practice within the limits of the Fair Debt Collection Practices Act to get you to pay a debt. Unpaid debt collections might appear on your credit report, affect your credit score, and keep you from getting other credit cards, loans, jobs, and apartments.

• What Are Collections and How Do They Affect You?
• FDPCA Overview

Is the collector calling during the allowed times?

Last year, the FTC received more than one thousand complaints of collectors calling outside the allowed times. There could have been more instances, only consumers didn't complain to the FTC about them. Debt collectors can only call you during certain times of the day. If a collector calls outside those times, its in violation of the FDCPA.

• When Can Collectors Call?

Do you want the debt collector to stop calling?

You have the right to stop debt collection calls. A request over the phone isn't enough, though. To keep a collector from calling you, you should send a written cease and desist letter telling the collector not to contact you. Keep in mind a cease and desist letter only works for that specific collector.

• How to Stop Collection Calls
• Sample Cease and Desist Letter

Is it your debt?

Don't take for granted that the debt actually belongs to you. Debt collectors are hardly konwn for their honesty. You have the right to have the debt collector validate that the debt is indeed yours and that they have the right to collect it. This means they have to provide some kind of documentation from the original creditor. If the collector can't provide this proof, they can't collect from you.

You only have a certain amount of time to exercise this right, so send your validation request as soon as a collector contacts you for the first time.

• Debt Validation - Make Collectors Prove You Owe
• Debt Validation FAQ
• Sample Debt Validation Letter

Has the statute of limitations expired?

The statute of limitations (SOL) is the amount of time a debt collector can legally sue you for a delinquent debt. The SOL varies by state and ranges from three to six years. Debt collectors might try to file suit against you even if the SOL has expired. All you have to do is prove the SOL has expired and the lawsuit can be dismissed.

• The Statute of Limitations on Debt
• How to Attack Zombie Debt

Has the collector violated your rights?

There are a number of things debt collectors can't do. For example, they can't ask you to pay more than you owe and they can't threaten to sue you if they can't or won't. If a collector has violated your rights, you can sue them for actual damages plus $1,000 in punitive damages.

• 15 Things Collectors Can't Do
• How to Report Debt Collector Violations
• Summary of Debt Collector Complaints in 2007

Should you pay the debt?

If the debt is old, say more than seven years old, you might just forget about it. After all, the statute of limitations and the credit reporting time limit have both expired. There are moral obligations to consider, too. Paying back what you owe is the right thing to do.

• Should You Pay an Old Collection?
• Tactics For Paying Off Collections

Can you have the debt deleted from your credit report?

If the collection appears on your credit report, it's best for your credit score to have it removed. Some collectors will delete the collection in exchange for payment. Others are adamant about keeping the collection on your report. When you can convince the collector to remove the entry from your credit report, make sure you get the agreement in writing. This way you can force the collector to hold up its end of the deal.

• How to Remove a Collection From Your Credit Report