Thursday, November 12, 2009

How to Deal with Debt Collection Agencies

Because of this economy, many of us have lost our jobs. Those of us that are "lucky" enough to still have a job are usually working at a low rate of pay, or have reduced hours. As a result, many debtors have defaulted on their credit card bills.

What happens when you don't pay a credit card bill? If you are only one day late, many credit card companies add a $39 late fee to your bill. If you credit card is maxxed out, this may put you over your credit limit, and you get an "over the limit" fee. This is in addition to the exorbitant interest rates that these banks charge. These fees will continue to accrue for about six months.

After six months, a $1000 credit card bill will end up being almost $2000. At this point, the credit card company or bank will give up on collecting the debt themselves. They will sell your debt to a collection agency for about ten cents on the dollar. Then the collection agency will call you repeatedly, expecting you to pay the full amount owed with all of the outrageous fees. They will leave threatening messages on your machine, and use all sorts of other dirty tactics to try to get you to pay.

Most of these tactics collection agencies use are totally illegal. For instance, when a collection agency leaves a message on voicemail, they have no way of knowing who has access to listen to it. This is potentially giving away sensitive information to an unauthorized third party.

The good news is, you don't have to put up with their crap. Here are some ways you can stop a collection agency from bugging you.

1. Write a "cease and desist" letter.

The Fair Debt Collection Practices Act Fair Debt Collection Practices Act (FDCPA) 15 USC §1692c indicates that if you tell a third party debt collector to stop contacting you in writing, they have to honor that request. You are basically telling them to sue or shut their pie hole. The chances of a collection agency suing you is pretty much zero, as it would be too time consuming and expensive to sue you.

2. Write them and ask them to prove the debt is yours.

This is a VERY effective way to get a collection agency off your back. This is called debt validation. If a debt collector can't prove that you owe the money within 30 days after they receive your request, they cannot continue collection efforts, and by law should not report any negative information on your credit report.

I had a negative entry from a collection agency on my credit report earlier this year. I wrote them and asked them to validate the debt. They sent me a printout of phone numbers that were called, and that's it. They could not produce a contract, or any other proof that I indeed owed this debt. Yet they continued to report on my credit report. I sent a complaint to my state Attorney General's office. After receiving a copy of my complaint, the collection agency folded, and removed the collection from my credit report.

3. Record the conversation between you and the collection agency.

WARNING: Not for the faint of heart!

If you record a conversation between you and a collection agency, you can expose that these agencies lie, break laws, and use other underhanded tactics.

Watch this video Chi-Town Bones and I made. This was a social engineering experiment, proving that collection agencies do not use good privacy and security practices. The collection agent was not very happy with us for exposing this.

John Griggs


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