How to deal with Collection Agencies, especially when they step out of bounds and make you see red

by cherylone

Collection agencies are companies who specialize in collecting unpaid debt for other companies. They can be mean, threatening, ruthless, unethical, and cruel.

This article will give you guidelines on how to deal with collection agencies, what you should say to them (and what you shouldn't), what you can do to stop the collecting efforts, what to do when they try to collect an old debt, and how to fight back when they break the law.

What are collection agencies?

Collection agencies were created by companies as a branch of their own company to collect on unpaid bills.  Collections became big business and the branches split away and began operating on their own.  They buy an unpaid debt from a company that has become frustrated with collection attempts (or that simply doesn't want to deal with late payments) at a fraction of the original debt.  Then they tack on fees, interest, collection costs, legal costs, anything they can think of, and then they ruthlessly go after the person who owes the money. 

Collection agencies know the laws which dictate what they can and cannot do when attempting to collect a debt; but they are counting on those on whom they prey to be ignorant of their rights.  Some are willing to work out an acceptable budget with those who owe the money when they first begin.  Most are usually reasonable (at first anyway), and polite.  However, if they don't get anywhere, watch out.

They can, and often do, become threatening, demanding, harassing, and ruthlessly use the personal information that they received from the original company against you.  I have heard of collection agencies reminding people that they know where they live and hinting that something bad might happen.  I have heard of them saying they are lawyers preparing to file legal action against people and then hinting that they will take everything.  Horror stories abound when it comes to collection agencies.  And those who are caught up in their webs are rarely left unscathed.

A collection agency's collection attempts can be stopped by filing bankruptcy, but only as a last resort since bankruptcy is such a drastic step.

Ever had to face a collection agency of any kind?

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90% of people who have debt will, at one time or another, have to face a collection agency, and some people have had to face collection agencies when they didn't even owe the money.

When a company threatens to send you to collections:

Remember a few rules.
  • Companies don't like to send people to collection agencies because they lose money on the deal--if you owe money and the company is threatening to send you to collections, try to work out a payment schedule with them first, they are usually willing to at least listen if they think they may get their money.
  • They will tell you that the action will ruin your credit-don't let them fool you, they have already ruined your credit the first time you were late with a payment.
  • If a company says they are going to send you to collections even though you are paying them--let them.  You can set up the same payment agreement with the collection agency who may actually be willing to accept lesser payments if they think they can make money on the deal--also in some states if you have been making payments and they still send you to collections you can fight the debt in court-keep your proof of payments offered to them along with any checks they may have sent back to you.
  • Companies don't want to have to deal with people who can't, or won't, pay their bills and often have a regular collection company that they use because they have worked out a special deal with them for the accounts.
  • It is okay for you to discuss a lowering of the amount you owe, since the company will lose money if they send you to collections anyway--if they think they might get more out of you than the agency, they may be willing to work with you.

Don't let the companies and businesses intidimate you.

All they want is your money, they don't care about your situation. They have agencies to turn to, you do not.
Dollar SignPile of Money

Once you have been sent to collections, what can you do?

Remember these rules:
  • Never tell a collection agency the debt is yours even if you know it is!  Instead, ask them for all the information about the debt--if the debt is legitimate, the agency will be willing to give you the information (also ask for their contact information).  If it is not legitimate, the agency will refuse to tell you details (possibly saying you already have that information or something similar).  In this case--agree to nothing, report them to the Federal Trade Commission, and hang up immediately after asking them not to call you again, if they persist in calling, send them a letter and report them again.
  • Write a record of the phone call with all information like the name of the person who called--if they mumbled, ask them to repeat it.  Record the date, time, amount, company they gave you as the originating debt, any information-threats-accusations-etc.  Then verify if the debt is legitimate, or not. 
  • Remember that a company sells your debt to a collection agency at a loss-generally a large loss-then they write off the account as un-collectible---so the collection agency is going to try to get as much as possible from you because that is all profit to them.
  • Collection agencies are limited by law in the amounts they can tack on to the account balance that you owe (in many states they are only allowed to collect the amount of the original debt) be sure to verify the amount is correct before you continue with the agency-don't let them inflate the charges and tell you it is fees and interest.
  • In many states, a collection agency cannot take legal action against you for unsecurred debt-be sure to check with your state's laws
  • Once you receive notice of a collection against you-if the amount is legitimate and you are satisfied that the collection is legitimate--only then should you try to work out a payment plan with them.  Don't let them bully you or harass you into paying more than you can--remember, they only paid a small portion of the actual debt and if you only pay what you owe they are still making a huge profit on the deal--don't be afraid to tell them that while you try to work out a payment plan. 
  • By law, collection agencies cannot--harass you with overwhelming phone calls; call you outside the 8 am-9 pm time frame; make a threat they do not intend to carry out (example they can't threaten repossession unless they are planning to do so); pretend to be lawyers preparing to file a law suit against you; contact you at work; be rude, abusive, or threatening; or hint that something bad might happen because they know where you live and work.  If a collection agency does do any of the above, you have the right to report them to the authorities.  To discover if their threats are empty--ask for the legal information--ie lawyer information; court of record; filing date; copies of the legal action against you; etc.
  • A collection agency and/or company to whom you owe money cannot file a case against you in a town where you do not live.  If you receive notice that a legal action has been taken against you in another district, you have the right to dispute the action in your own district.  Also, if you are suddenly receiving notice of a lein on your property or wage garnishment that you were not aware of, you can fight it in court. 

When dealing with any company, business, medical facility, etc., be sure to keep all records in a safe place.

Mark unusual circumstances, etc., and date everything.

By keeping all of your papers, even if it was a cash transaction, you will have records you may need later on to verify amounts or protect yourself against a collections law suit.  Note names of people you have spoken to or dealt with; note times and dates; note changes verbally made; note payments given; track everything carefully; once the account is paid, keep the files for ten years.

Why?  Because you may have paid a bill and the company's records say you did not; they could send you to collections.  Or perhaps you made an arrangement for payment, but the company sent you to collections anyway, you have names, dates, amounts, etc. to prove your statements.

What to do when the debt is an old one?

Scavenger Debt Collectors are collection agencies that specialize in collectiong debt that is beyond the Statue of Limitations.  Most states and countries have Statute of Limitations on debt collections.  Once the debt has reached that point, a company can no longer legally take action against you for the amount.  However, be very careful about this one.  If you agree that a debt is yours in any way, shape or form, the Statute of Limitations will start over again and the company can then begin legal action against you.

Follow the scales of justice

AllPosters has posters for all situations, even a poster on the Lady of Justice herself
The Scales of Justice Above the Old Bailey Law Courts, Inns of Court, London, England, UK

Check your area for the Statute of Limitations on debt.  Once a debt has reached that point, all you have to do is tell a collection agency that the debt is past the Statute of Limitations and for them to leave you alone.  First--don't say that is my debt--just say the debt is past the Statute of Limitations.  Second--record the information they give you and any you give them for future reference, agree to nothing but ask lots of questions.  Third--once you tell them to leave you alone, they must, by law, comply.  If they don't, send the request in writting.  If they persist, report them.

Do you know what your State/District's Statue of Limitations is on debt?

Remember, not all laws are identical, and for debt they may even be complicated.

What if the debt has already been paid--

either to the original company or to a collection agency?

Some debt collection agencies specialize in buying up old debt, especially debt that was not paid in full for whatever reason. For example the original company was willing to settle for half the amount and told you they would write off the rest.  The company can then sell the account to a collection agency who will contact you and try to collect on the debt again trying to say you still, by law, owe the remainder of the debt.  That is not true and you do not have to pay.  Do not agree that the remained of the debt is yours.  Tell them the account was paid in full and for them to stop contacting you.  If they persist, send them a letter.  If they still persist, report them.  Be aware that some agencies will collect what they can and re-sell the debt to another agency.  Don't let them trick you into paying.

eBay has books that can help in your search

For more information:

International Consumer Protection
International Consumer Protedction information

Federal Trade Commission
Federal Trade commission

A quick reference, in case you are in a hurry

A Collection Agency
  • Bought your debt for a fraction of the actual amount
  • Will use any means to trick you into paying
  • Cannot take legal action against you in another state
  • In some states cannot take legal action against you if the debt is unsecured
  • Cannot threaten an action if they are not planning to do this action--get proof
  • Must give you detailed information about a debt if you ask for it
  • Can collect an old debt if you admit that it is your debt
  • Cannot claim to be a legal office (such as a lawyer's office) if they are not--get proof
  • Must stop calling you if you tell them to-send written notice
  • Cannot harass you with an overabundance of calls or calls that fall outside of the 8am to 9pm calling time
  • Cannot call you at work and ask for payment
  • Will use illegal means because they assume you do not know your rights--They will give up if you prove that you DO know your rights
  • Must give you their contact information if you ask for it
  • Can legally sell a debt that is not paid in full and often sells ones that are paid in full in order to make more money
  • Cannot collect on a debt you have already paid and/or paid off a settlement amount on unless you agree that you owe the money
  • Fear anyone who knows the law and fears one statement above all others -- "I'll be talking to my lawyer about this!"
  • Can be intimidated, just know the law and let them know you know the law
Updated: 04/06/2019, cherylone
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cherylone on 08/13/2012

Tolovaj, thanks for stopping by and commenting. I don't think anyone would ever want to deal with this, but it is kind of nice to know some of the tricks.

Tolovaj on 08/13/2012

This is very interesting info. I know our laws are different and we will have collecting agencies in the future, so the laws will be changed again. I hope I'll never had to deal with this kind of debt collecting on neither side...

cherylone on 06/25/2012

I am glad you found it useful, I know how difficult it can be when you are in debt, but the collection agencies make it much worse. Thank you for stopping by and commenting.

spirituality on 06/25/2012

Very useful. I didn't know any of this. Fascinating - and useful for people who are in this situation, which must be tough.

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