Mostly, debt collectors work for the money collecting agencies or creditors to recover payments from debtors. They are not always allowed to work independently and some are attorneys as well.
Many times, debt collectors work as the middleman between the debtors and the creditors. So, there are various types of debts such as credit cards, personal loans, automobile loans, student loans, and many others.
Sometimes, you might not be able to pay the amount that the creditor demands. At that time, can negotiate with the creditor to make the changes in your payment.
So, if you don’t know how to deal with the creditors, keep reading for more information on debt collection and settlement. Debt settlement helps you to avoid bankruptcy and you will get creditors off your back.
Process of Debt Collection
Many times, you might not be able to make on-time payments for your debt. The lender might not send a collector right away, as hiring one cost a lot. At that time, the creditor will try to talk with you directly.
First, they will call you and then start writing to you. If you are unable to make the payments, then they might schedule a meeting to discuss this out.
Sometimes, you might ignore the lender’s calls and the pending payments. At that time, you will find that the lender will sell the account to a debt collector and they might chase you for the repayment.
Besides, if you have not paid the bills for the past three to six months, you will come across this situation where the creditor will initiate the debt collection.
What are the Types of Debt Collectors?
Generally, there are three types of debt collectors. They are internal debt collectors, collection agencies, and debt buyers. Below, you can find all the details about each type of debt collector that creditors might prefer.
Internal Debt Collector
Generally, internal debt collectors work for the company but, they are the one who collects the payment peacefully. It indicates the internal debt collectors are the first party collectors and they don’t have to follow the same rules as other debt collectors.
Also, they will always try to talk with you politely to not make the company look bad.
So, if you have not made the payments for three months, then you will get calls from those who are the first-party debt collectors. If you are able to work out a plan with them, you can avoid lowering or damaging the credit score.
Sometimes, the lender might not work out a deal and you will notice that your account is with a third-party collection agency. These types of companies get some money from the lender and they charge somewhere between 25% to 60% of the amount they recover from the debtor.
Most of the time, you will get rude behaviour from them. They do so because the more they collect, the more they get paid.
Many times, the lenders try to collect a debt but fail somehow. At that time, these creditors sell the debts to a debt buyer, where he is paid £0.04 for every £1. However, debt buyers buy quite old debts and often, they don’t know where the particular debt comes from.
Types of Debts that the Debt Collectors Collect
There are many types of debts that a debt buyer can collect. In includes student loans, auto loans, medical debt, credit card debt, payday loans, utility bills, and many others.
Generally, credit card debt and unpaid phone bills are sent for the collections.
Know your Rights Before Dealing with Debt Collectors or Creditors
FDCPA provides certain rules that a debt collector can follow in the UK. Hence, you should know your rights properly before dealing with a debt collector. Otherwise, they might force you to pay a lump sum amount. So, if you agree to pay that amount, then you might face issues in the long run.
There are certain things that a debt creditor is allowed to do and those are:
Contact you at Home
Debt collectors can connect you through phone calls, letters, e-mails, etc. When you receive a message, you need to check whether a debt collector sends it to you or not. Many fake debt creditors are available and they might try to scam you.
Change the Interest Amount
After borrowing the money, you have to pay it back with interest. When they take over your debt, they are allowed to charge you the same amount. But they have the right to change their interest amount.
Take you to the Court
Because of certain circumstances, you might be unable to pay the debt. This is when the debt collector can take you to court. If the collector wins, then the court will release a garnishment order against you.
There are certain things that collectors are not allowed to do:
- They are not allowed to keep you in the dark as you have the right to know everything about the debt. A debt collector must provide you with a letter mentioning how much you can owe and to whom. Make sure that you receive the letter within 5 days after they first contact you.
- Debt collectors can not call you anytime. They are only allowed before 8 am and after 9 pm as per your convenience. Besides, during your working hours, you are allowed to end their calls.
- Sometimes, you might face some circumstances where it is not possible to contact them. In such cases, you need to convey this in writing and ask them to contact your attorney.
- Debt collectors have no right to call the debtor’s family and friends. They are not even allowed to pressurize them to make you pay the amount.
- They are not allowed to lie to you and pretend like police or government agent.
Here’s How to Deal with the Creditors
If you try to adjust the payments, know the proper way to deal with the creditors. First, try to make a proper payment plan on your own. Also, consider the following points while dealing with creditors or debt collectors:
Stick to Your Story
Sometimes, you might be unable to pay the bills but, the creditors will never understand your circumstances. Hence, you are advised to include the following sentences when you talk with the creditors.
- You can say that you were very ill or out of work for two months.
- Try to mention the financial burdens on you and your partner. Also, explain that both of you don’t have money to make the payments.
- You can tell them you are facing issues to make the payments as the interest rate is very high.
When you communicate with the creditors, make sure to stay calm and not lose your temper. Sometimes, they might talk to you rudely and it might make you aggressive. At that time, you need to convince the creditor to talk later.
Often, you might need to talk to the representative again. So, to keep them on their best behaviour, inform them that you are recording the conversation.
When you can’t make payments in time, you will end up experiencing the collector’s rude behaviour. They might threaten or say that you will lose the property. So, you need to ask them when you will be notified of the lawsuit or any other debt-related questions.
You should ask them when they will withdraw money from your bank account. As some of their threats might be illegal hence, you need to know the payment plan properly to deal with them.
When you talk to a collector, you can make notes. At that time, you should not forget to write the person’s name and note down your discussion topic. If you forget anything, then this writing will remind you whether they broke any law or not.
Always Read and Save the Mail/email
After receiving the email from your debt collector, make sure to read it. You should always save that message as it can help you to free from certain situations in the future.
Besides, if they are attempting to break rules and try to take payments from you forcefully, you can use that email as your evidence.
Know your Ability
Before agreeing to any payment plan, check whether you have the ability to opt for it or not. Sometimes, a debt creditor might ask you for a lump sum payment.
So, before agreeing to pay that amount, you should check your income and the expenses. Otherwise, it can lead to a tough financial situation.
When you come up with a lump sum amount, you need to negotiate with your creditor for the best settlement. Thus, you will be able to resolve the debt effortlessly without facing any tough conditions.
Try to Deal with the Creditors
Make sure to deal with your creditors before a bill is sent to the collection agencies. Hence, you should make an agreement with your creditor, not the collector.
Remember that, you should avoid making late payments as that will affect the credit reports and scores. Due to the late payment, the account can be damaged to a great extent.
You should try to pay something towards a debt as it can not be turned over to a collection agency. So, the amount can be even £5 or £10. Besides, make sure to talk with your creditor before the debt has been sent to the collections. Otherwise, you will have to deal with the creditors.
Get Creditor’s Words in Writing
Whenever you attempt to make any payment to the debt collector, get it in writing. Before paying a penny, make sure that you got it in writing.
Otherwise, you might face that the terms have changed and your words do not match theirs. There are many users who thought they have resolved their debts years ago but, they were chased for the balances later on.
Take Help While Negotiating with Creditors
Sometimes, you can be in trouble because of your repayment plan. At that time, you need to go to a credit counseling agency to settle this matter. Otherwise, the debt collectors might be chasing you.
Then, you should request them for a free consultation with the help of a bankruptcy attorney. The attorney has the right to decide what these creditors can do and want not to collect the payment.
Don’t Think about Past
Often, you make the late payments and hence, the credit status can be affected. Now, if you pay the collection account, your credit status will not improve immediately. Whereas, if the creditors agree to your proposal, then only you can improve the credit status.
- Remeber that late payments lead to a poor credit score that will stay on your credit report for up to seven years.
- You need to keep in mind that the charge-offs might remain active for up to seven years as well.
- The collection account can stay for seven years plus 180 days. It starts immediately ahead of the collection activity.
When your debts are resolved, you will be able to build a better credit report. So, if no new negative information emerges, then your credit report will improve again. Hence, visit the official site of the creditor in order to check the credit score periodically.
Should Know Your Terms
There are two things that you must have to negotiate with your debt collector. You need to discuss how much you can pay and credit reports.
So, when it comes to payment, you can settle your debts for 40-50% of what you owed. But, if you are unable to pay a lump sum amount, you should discuss it with your creditor. If your payment report is good, then they might agree to negotiate with you.
How to Negotiate with Various Creditors?
If you try to settle your debt, you need to discuss the matter with your creditor. He/she will then help you to find a good way to solve the debt issue. There are various types of creditors and before negotiating them you should know the proper way.
You might face difficulty during the payment of your student loan debt. If you try to reduce the monthly payments, you can take help from the government programs. It will help you to reduce the monthly payment and the repayment length will be extended. You might also notice that they have canceled some part or all your debts.
During the monthly payments for your home loan, you might struggle to make the repayments. You might not know there are few home loan modifications that might help you to reduce the monthly payments. So, you can cover these points while negotiating with your creditor.
Credit Card Companies
Credit card debt negotiating is one of the easiest debts but, it might take some time to make a reasonable settlement. So, before going for the negotiation, assure that you know all the negotiating tactics of the credit card companies.
There are many advantages to the secured loan that you will not find in an unsecured loan. You should know that the debts are secured with collateral in most of the secured loans. So, if you are dealing with this type of loan, then go to bankruptcy for the negotiation. Also, when it comes to making a payment, try to negotiate on the balance as well.
How to Protect Yourself from a Fake Debt Collector?
There are many fake debt collectors and you might not be sure whether they are legit or not. So, you have to ask them for their contact information and always try to get it in writing. If you have any confusion or not 100% sure, then you can contact the creditor before paying them a penny.
Make sure that you have not provided any personal information to the debt collectors without confirming their identity. Sometimes, you might get a phone call from a scammer and you can report it to the Federal Trade Commission. Below are some more tips to stay safeguard from debt collection scams:
Ask for a Validation Letter
Before discussing with the debt collector your debt issues, you should ask them to show a validation letter. In some cases, you might have to remind them to send you a validation letter.
Also, make sure that you have not agreed to their proposal until they have shown you that letter. Otherwise, you might have to pay a debt that is not yours as the collector might not have proper authentication.
Check the Credit Report
Many times, the debt reporters can make a mistake while checking your report. So, due to their mistake, your credit report will be hampered. Sometimes, an unknown person might take a loan in your name as well and don’t pay that amount.
Hence, you should check your credit report in order to see whether the debts are listed there or not. If you notice any mistake, then contact a credit bureau to solve it.
Make sure that you have the written records of your dealings. It can be possible that the debt collector breaks the law. At that time, you can show a copy of the record as your evidence.
Moreover, check whether you have the written details of the entire phone conversations between you and the debt collector or not. You can use it as your evidence while dealing with the creditors.
Make Payments Carefully
You must have all the details in writing before initiating the conversation with a creditor as they might deny their words in the future. Also, before receiving a written agreement, you should not pay any amount to them. Once you pay the creditors, they might take further action against you if it was not recorded in a written document.
Sometimes, you might want to pay the debt in installments as well. But, you should not give permission to the debt collectors to withdraw the money directly from the bank account. Otherwise, they might withdraw the full amount that you owe.