NEW YORK (MainStreet) — Just about everyone has gotten a call from a collection agency at some point. It's stressful to say the least. You want to get the collection off of your credit report so that you can get your credit score back on track. But you don't want to get taken advantage of by an unscrupulous collection agency. So how do you pay off your collection account the right way?
Be Aware of What You Can Pay
John Heath, directing attorney with LexingtonLaw, says that before you do anything else, you need to know what you can pay. "A lot of creditors will use two tracks," he said. "They'll cut you a deal if you can pay a larger amount sooner. If you make payments, they might not give you a discount." The problem is that if you can't stick to your agreed upon payments, you lose any deal you had. What's more, you're extending the statute of limitations on the debt. So don't agree to anything you can't actually pay.
Get It in Writing
One place where a lot of consumers trip themselves up is not having a record of everything they do with a collection agency. It's not that every collection agency is unscrupulous. It's just that some are, and the ones who aren't will have no trouble putting everything in writing. Mike Sullivan, director of education with Take Charge America, urges people to keep their bank statements and cancelled checks from any payments made to a collection agency. "If they keep coming after you, the law is very protective of consumers who are getting harassed or abused by collection agencies," he said.
But before you even pay your agreed bill, get that in writing. Otherwise it's just going to be your word against theirs. Heath notes that "one rep might make a deal with you, but another rep might try and change it." If you have that agreement in writing, you're protecting yourself from those kinds of shenanigans.
Try to Get Pay for Deletion
When you get a call from a collection agency, you should try to get the debt deleted from your credit report. That's not something the collection agency is legally bound to do. However, they might remove it if you ask. Your chances of getting it removed are greatly enhanced if you can pay it all in one go. But remember to get that agreement in writing. "It may be a good idea to ask them to remove it. Sometimes they will, but sometimes they won't."
"One of the things you would typically request in the agreement is that they will report the debt paid in full," says Sullivan. That's not quite the same as getting it removed from your credit report. The collection will still be on there, but it will be paid. Sullivan believes that if you're contesting the debt, your chances of getting the debt removed entirely. So how do you contest the debt?
Validate the Debt
"If you feel the debt is not legitimate, you have to contest it," says Sullivan. You wouldn't be the first person to have a collection agency try to collect a debt that wasn't even yours. Fortunately, there's a process in place that allows you to absolutely determine that the debt is yours. It's called debt validation, and it's your right under the Fair Debt Collection Practices Act.
"After you get your letter, you have 30 days under the FDCPA to request validation of the debt," Sullivan says, adding a consumer should always make this request. Even if the debt is yours, the collection agency might not actually own it, or the amount might not be accurate. Filing a debt validation letter, which you can do yourself, makes the company get all its paperwork together and prove that you owe the debt, that the amount is correct and that it is legally authorized to collect the debt. You wouldn't hand over $500 to some random people in the street who said they owned an old phone bill. Don't do it with a debt collection agency.
You can find form letters online for requesting validation of debt under FDCPA.
How to Negotiate With a Collection Agency
"I always like to get them to throw out a number first so you're not negotiating against yourself," says Heath. "Ask them what the lowest amount they would accept is." For example, if you owe $1,000, the collection agency might offer to settle for $750. You can then offer to pay them $650 and settle with that. "Some companies have policies regarding what they will and will not accept as settlement," Heath says. If you run into a brick wall, ask to talk to a supervisor. He might be empowered to make settlements that the person you have on the line can't.
Don't get spooked when you have a collection agency call. Keep yourself collected, go about things the right way and you might just save yourself some money.
--Written by Nicholas Pell for MainStreet