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The saying “What comes around goes around” could be the motto for collection agencies that specialize in collecting old or even previously paid debts. The collectors can get very aggressive in their practices even to the point of being verbally abusive and harassing. They may even attempt to trash your credit by reporting old debt or re-reporting paid off debt that was previously in collections. Sometimes it is nearly impossible to shake off collectors even when the debt has been paid. But consumers have rights, you just need to know what they are so you have ammunition to use against attacks.
Collection companies pick up old debt accounts from the original creditors and even other collection companies that could not collect the amount within a certain amount of time, and they buy them for literally pennies on the dollar! These companies seem to be faring pretty well even in today’s economy which only proves that there is money in old debt (and harassment).
The general guidelines for debt purchases are:
- Debts that are delinquent but not yet charged off by the original creditor can be purchased for up to 12 cents on the dollar.
- Accounts that have recently been charged off: 7 to 9 cents on the dollar.
- Accounts that are slightly older and on which a collection agency or two has already taken a turn at collecting: 1 to 3 cents on the dollar.
- Years-old, out-of-statute debts: A penny or less.
- The oldest debt is by far the cheapest, sometimes costing the collector 25 cents for every $100 in face value. If the collector can convince the borrower to cough up even $1, the company has made back its costs. Most of the time the collection agencies do not even know for what the original debt was..
Some companies only see green, and because of that, their collection tactics can sometimes be downright illegal. More than 70,000 complaints against collection companies are received every year by the Federal Trade Commission. In many cases, the consumers either did not owe any money or the amounts were hugely inflated and collection companies have reported inaccurate information to the credit bureaus. Many of these companies have come under the scrutiny of the FTC and have been sued or fined for their illegal practices. The sad thing is the companies make enough money to cover the fines and keep on doing business as usual.
Some common practices of collection companies include:
- Badgering consumers for debts they do not owe, that have already been paid or that were legally erased in bankruptcy court.
- Suing or threatening to sue over debts where the statute of limitations has long expired.
- Illegally “re-aging” debts on credit reports by telling credit bureaus that an old debt is, in fact, a new one. This extends the seven-year limit on reporting negative items and puts more pressure on the consumer.
- Promising to delete a negative rating from the consumer’s credit report in exchange for a token payment. Not only does the collector not follow through, but the payment can revive the statute of limitations and lead to a lawsuit.
- Bait-and-switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged-off debts — often purchased from other lenders — onto the balance.
- Verbally abusing and harassing consumers.
The only way to successfully fight collection companies using unfair and illegal tactics is to know your rights. But be aware that even if you are able to thwart one creditor it may still sell that account to another company and it all starts over again. Some rights you need to be aware of:
Know the statute of limitations. Check out the statute of limitations in your state. If the statute has expired, the collection agencies’ legal remedies are limited.
Credit and debt collections can be an extremely complicated area of the law. Consider arming yourself with a book such as Leonard’s “Money Troubles” and — if the amounts at stake are considerable or the level of harassment unbearable — consider contacting an attorney
Ignore the phone calls. If the statute of limitations has expired, do not answer the phone or just hang up. There By taking the calls you could inadvertently extend the statute of limitations or find yourself roped into a repayment agreement that might not be in your best interest.
Write them. If ignoring them is not working, consider writing a letter demanding them to stop contacting you and do not mention acceptance of the debt in any way. Send it certified mail, return receipt requested. Federal law requires them to comply with your request.
Careful settlement.. If the statute of limitations has not expired, you may want to discuss a settlement rather than risk a lawsuit.
Settling a debt for a smaller amount than the collector says you owe could result in another agency trying to collect the unpaid portion.
Keep an eye on your credit report. If a collection agency tries to repost an old debt or lie about the date it went delinquent, you will need to fight back .Dispute the entry with the credit bureaus and with the collection agency.
In many cases, the collection agencies do not know what the original debt was for. In these cases, you can request proof of the debt including the original signed documents and detailed statements. Chances are the collector will not have this documentation, but will continue to report the account. Reporting a delinquent account without providing proof that you owe the money is a violation of the Fair Debt Collection Practices Act.
Because debt collection is such a profitable business, fighting them can be difficult and if there are several trying to collect debts it can be very stressful. All that stress can cause all sorts of physical and mental duress. In this case, your best bet is to make an appointment with an attorney who specializes in debt collection law to help you cut through all the harassing red tape. The National Association of Consumer Advocates can provide referrals.
Federal Trade Commission