Collection agencies work with lenders and service
Rights
providers in two different ways. The first way is for the
We all know that life can throw curve balls when we least
agency to buy the bad debt so that they own it out-
expect it – a job loss, death in the family, unforeseen ill-
right. In all cases, collection agencies purchase these
Collection
ness, etc... In these cases, it may be impossible to avoid a
debts for much less than the amount owed—usually
collection. If they already have a collection, here are some
Agency
pennies on the dollar. Another option is for the lender
very important things that you should know about:
to consign the account to the collection agency. With
this option, the lender agrees to pay the agency a per- 1. Fair Debt Collection Practices Act
Accounts
centage of whatever amount their collectors are able Know your rights as outlined in the Fair Debt Collec-
to recover. This percentage can vary, of course, but I’ve tion Practices Act. If you have a collection and have
By Edward Jamison, Esq.
seen as high as 50% in some cases. been contacted by a collection agency, you only have
What You Need to Know
30 days to dispute the debt or to request the collector
Once the collection agency takes over the account,
With the recent tightening of available credit – it’s
to validate the debt. You also have rights that protect
they give financial incentive to their agents by reward-
no wonder that more and more lenders, hospitals
you from harassing and unethical collectors. To read
ing them with bonuses if they are able to collect most
and landlords are turning their focus to collec-
a summary of your rights, go to
http://www.ftc.gov/os/
– or all -- of the outstanding debt. The more the agent
tions in an effort to recoup some of their losses.
statutes/fdcpa-jump.shtm.
is able to collect, the more money they get to put in
In the past twelve months, I’ve seen a drastic
their own pockets. This can sometimes lead to ruth-
2. Statute of Limitations
spike in consumer complaints about collection
less, unethical collection practices.
A lot of consumers confuse the credit reporting statute
agencies and their strong-arm tactics. Unfortu-
Avoidance
of limitations with the statute of limitations to col-
nately, with the current economic downswing lect a debt. In many cases, the statute of limitations
The easiest way to avoid a collection is to pay
and the constant murmurs of a recession loom- to sue for contract debt can be much longer than the
your bills – and pay them on time. Sometimes
ing ahead, it’s only going to get worse. You need debt can legally be reported to the credit bureaus. The
this may mean laying aside pride and paying a
to know how to avoid collections before they debts are certainly still collectable, just not reportable.
bill you don’t necessarily agree with just to avoid it
happen – and how to deal with them if they do. If they have a collection that is close to being removed
going into collections.
because of the statute of limitations – 7 years – and
How It Works
If you don’t agree with a charge or feel you have they are able to pay it or settle it, have them do so.
Collections will have a serious negative impact
been treated unfairly by a provider – utility
on your credit reports and scores. They are never
company, cell phone company, doctor, dentist, etc.,
3. Don’t Ignore the Collection!
good and should be avoided at all costs because
-- withholding payment isn’t a wise option. Eventually
Recently I heard a very well known and highly respected
they are next to impossible to get removed.
the service provider will turn the account over to a col-
consumer advocate celebrity advising people to ignore
But before we delve into how to handle collec-
lector and that will negatively impact your credit for
collectors if they don’t have the money to pay. This is
tions, let’s clarify what a collection is and how the
up to seven years.
probably the worst advice possible. Communication
is vital. Avoiding collections does not make the collec-
system works. A collection is an action taken by a
I can’t tell you how many times I’ve heard from dis-
tion or the bill collectors go away. In fact, the collection
lender (or service provider) in an attempt to col-
gruntled clients who refused to pay a bill “on princi-
agency will most likely end up suing you if you owe
lect an unpaid or delinquent debt. Some lenders
ple” and then ended up with a $72 collection on their
them over $1,500 and possibly garnishing your wages.
will use their own internal collection departments
credit reports. It’s just not worth the damage it causes.
Ignoring them won’t stop the process; it will only make
while others will outsource debtors to a third
In the long run, it’s just better to bite the bullet and
it much worse and more expensive in the long run.
party collection agency. Either way, the collector’s
pay the bill.
Continued on page 66
66
www.coloradohomeownermag.com
primary task is to convince debtors to pay up.
www.coloradohomeownermag.com
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