The material presented here is for educational purposes only and is not intended to be used as financial, investment or legal advice.
7 Steps to Dealing with Debt Collectors
Whether you are behind on paying off debts or current, it’s never comforting to get a call from someone demanding immediate payment. These calls may be legitimate, or they might be scams. Regardless, there are several things you should know to protect yourself from debt collectors and their attempts to intimidate you.
Falling behind on your debt payments is stressful enough, but when aggressive or unethical creditors start calling you repeatedly, it can be intimidating.
A recent study shows that 80% of Americans are in debt.1 In November 2020, U.S. consumer debt rose at an annual rate of 4.4% to slightly below $4.2 trillion.2 That’s a lot of debt for one country!
If one of these Americans is you, you may have been contacted by a debt-collection agency. This happens when a creditor uses an in-house collector or hires an outside company to collect overdue debt on its behalf. It can also happen when a debt-collection agency buys a past-due debt from a creditor at a discount.
No matter how they got your number, getting phone-tagged by debt collectors is no one’s idea of fun.
Below, we’ve listed seven steps to take if you’re dealing with debt collectors.
1. Don’t React Immediately
When debt collectors reach out to you, your gut reaction may be to agree to whatever they ask just to get them off your back. However, it’s best to hold off from taking any action until you learn more. Be careful not to provide any of your financial information to the caller. Don’t pay any debts on the spot and don’t verbally agree to any future payments until you find out more details about the outstanding debt.
Tip: Making a payment of any amount is an acknowledgment of the debt and could have negative repercussions.
2. Don’t Ignore the Problem
Ignoring your debt may seem like the easiest way out, but unfortunately, it’ll only make the problem worse. There’s no quick way out of extreme debt, so it’s best to just take a deep breath and jump right in. If you are being contacted by collectors about legitimate debt, face the problem head-on as quickly as possible.
3. Gather Your Facts
Before you take any concrete action, make sure you have all the relevant information about the outstanding debt. Ask the collector to provide details in writing and do your research to make sure you have all the facts you need — including exact amounts, interest rates and anything else that might be relevant. Keep your own records of all written and verbal communication with the collector as well. Store these documents in a well-organized file for future reference.
4. Ask for Help
If you’re having trouble paying off debt, you don’t have to go it alone. There’s help available for those who need it at the National Foundation for Credit Counseling. You’ll be connected with a credit counselor at no charge and you’ll have the guidance you need as you figure out the next steps and work on developing a plan to get out of debt.
5. Know Your Rights
There are legitimate debt-collection agencies whose behavior falls within the law, but unless you know your legal rights, it can be difficult to differentiate the law-abiding collectors from those who practice unlawful and overly aggressive tactics.
Under the Fair Debt Collection Practices Act (FDCPA)3, debt collectors generally cannot:
- Contact you before 8 a.m. or after 9 p.m.
- Contact you directly if they know you’re represented by an attorney.
- Contact anyone other than your spouse regarding your debt, although they can contact third parties to request your contact information.
- Contact your place of work if they know, or are told, that your employer prohibits this type of communication.
- Make any kind of threats.
In addition, debt collectors must send you a written notice within five days of the first contact that includes the following information: The amount you owe, the name of your creditor and information on how to dispute the debt (which you must do within 30 days of receiving the notice). Also, if you notify a debt collector in writing that you want them to cease all communication with you, they must comply.
In Arizona, however, creditors and collection agencies have other legal means through which to collect outstanding debt. They must first file a lawsuit and appear in court, but if they’re granted a judgment against you, they can legally pursue the following actions:
- Garnishing your wages. In Arizona, creditors can typically garnish 25% of your disposable earnings, which is calculated as your income minus taxes and government benefits.
- Placing a lien on your property. With a lien on the title of your property, creditors can require that you pay off your debt before collecting any money from the sale or refinancing of that property. A property lien in Arizona expires after 10 years.
- Levying, or seizing, your personal property or wages. Creditors may seize money from your bank account to cover unpaid debts, although the first $300 in your account is protected against seizure by law.
Knowing which measures are within the law will help you recognize the legitimate debt collectors from the unlawful ones.
6. Decide How to Tackle Your Debt
If you can’t afford to pay off your debt in full, you have options:
- Negotiate with the debt collectors to settle the debt for a lower amount.
- Take out a debt-consolidation loan, which will allow you to pay off all outstanding debt and transfer the amount to a single lower-interest loan.
- Refinance a home or auto loan to lower your monthly payment amount.
- Consolidate credit card debt onto one low-interest card.
- File for bankruptcy. This extreme step should only be taken as a very last resort if you have no other choice.
7. Avoid Debt-Collection Scams
If a debt collector is overly aggressive, does not follow the guidelines mentioned above or is calling about a debt you don’t recognize, you may have been targeted by a debt-collection scam. In the more nefarious version of this ruse, scammers posing as debt collectors call victims and claim they have delinquent debts that must be paid immediately. They may threaten arrest or other legal action. They’ll demand payment and will usually insist upon a specific means of payment, such as wire transfer or prepaid debit card.
If you believe you’ve been targeted by a debt-collection scam, ask the caller to send a validation notice of the debt with the following information:
- Exact amount owed
- Source of the debt
- Name and contact information of the debt-collection agency
- How to dispute the debt
If the caller refuses to furnish this information, or the information they provide is false, you may be looking at a scam. Inform the alleged collector that you don’t want to be contacted and don’t engage further with the scammer. Follow the instructions for disputing the debt as outlined in the validation letter. You’ll have 30 days to do so after receiving the notice.
If you’re unsure about a debt, check your free credit report, which is available to you annually from any of the three major credit bureaus. If the alleged debt isn’t listed, you’re dealing with a scammer.
If a debt collector is being unlawfully aggressive, continues to harass you after you’ve verified that they are a scammer or does not stop contacting you after you’ve asked them to cease all communication, you can file a report online with the state of Arizona’s attorney general’s office. You can also call 602-542-5763 if you are in the Phoenix area, 520-628-6504 for Tucson and 800-352-8431 for anywhere else in the state.
Remember, it’s always better not to share any personal information, make a payment or agree to a future payment before verifying an alleged debt.
Tip: Sharing your checking account information with a caller gives them access to the account.
Getting phone-bombed by pesky debt collectors isn’t easy. Neither is crawling out from under a mountain of debt. But, with the right information and tips, you can learn how to deal with aggressive and unlawful debt collectors and take steps toward a debt-free life.