Dealing with collections accounts can be quite stressful. You might have debt collectors calling on the phone, informing you that you owe money on a debt. They might also be sending you letters – or even texting or emailing you.
These accounts can appear on your credit reports, which causes major damage to your credit score. This makes it harder to qualify for credit cards and all types of loans, apartment rentals, and can even increase the cost of your car insurance.
While there are a number of strategies to deal with debt collectors, I’d like to share two powerful methods with you. Neither of these is widely known, outside of the circles of lawyers who sue debt collectors, and perhaps a few smart credit repair companies.
Both of these strategies make use of provisions of the Fair Debt Collection Practices Act, popularly known as the FDCPA. The FDCPA is a powerful federal law, which regulates the conduct of debt collectors. As a consumer, you’re allowed to sue and collect damages, if your rights are violated.
Using the strategies detailed below, you might be able to wipe out collections – and get paid by the debt collectors. As crazy as this sounds, it is possible. In fact, it happens fairly often.
Please note that what we have discussed below is not legal advice. These are merely suggestions. If you’re dealing with credit and debt issues, you should seek professional help, ideally that of an attorney.
Please also note that you should only use the tactics below for collections accounts under $1,000. If you owe more than $1,000 on a collection, you should not use the tactics discussed below.
Why? With larger collections accounts, there is a real risk of being sued on the debt. By disputing or otherwise communicating on the account, you might be putting yourself at risk. These sorts of accounts should only be addressed with the use of professional help.
Method #1: Disputing Debts By Phone
Under the FDCPA, you have the right to dispute any debt in collections. If the debt appears on your credit reports, it must be marked as disputed.
If a debt collector fails to mark a debt as disputed, you’re eligible for up to $1,000 in damages, as well as reasonable attorney fees. This means that you can find an attorney to represent you, in a lawsuit against a debt collector, and not pay him or her a penny. The debt collector will pay the lawyer’s fees, typically in addition to the money you recover from the lawsuit.
Debts are often disputed in writing, but they can also be disputed verbally. Federal courts across the country have ruled that verbal disputes are valid. However, here’s the thing: Employees of debt collection agencies often forget to mark accounts which were disputed verbally, as being in dispute.
Debt collectors typically have high employee turnover. This means that new employees come and go. Many last for just a few months on the job.
As a result, they often don’t learn the proper procedures for dealing with consumer disputes. This can lead to your rights being violated.
As unfortunate as this situation is, you can use it to your advantage. First, you’ll want to check your state’s laws on recording phone calls.
Recording Phone Calls
Some states, like Texas and New York, are what we call one-party consent states. In these states, only one party on a phone call, must agree to have the call recorded.
So, if you live in Texas, and are on the phone with a debt collector in Texas, you don’t have to ask for permission to record the call. Only you have to agree with the call being recorded.
In other states, such as Florida and California, you’ll typically need the consent of all parties, to record a call. This means that you must disclose that you’re recording the call. Failure to do so can be a misdemeanor or felony.
Here’s where it gets tricky: What if you’re in Texas (where consent is not required), but you call a debt collector in California (where you do need consent)?
While this might be legal under Texas law, it is illegal under California law. After all, the phone call is happening in both Texas and California.
For this reason, you must be very careful, when it comes to recording calls. Generally, our advice is to always announce that the call is being recorded. We’ll go into that below.
How can you go about recording a phone call? Check out this guide for call recording on an iPhone, and follow this article for Android.
Phone Disputes, Step By Step
Now that you understand how to record phone calls, and how the law protects you, you can implement this powerful strategy. You’ll want to call the debt collector, and dispute the debt – and see if they follow legal requirements.
First, make sure that your phone recording device / phone app is set up, and ready to operate. Next, you’ll want to dial the debt collector, at the phone number they’ve provided on your credit reports, or collection notices.
Before making the call, you’ll want to have some basic information handy. This includes your Social Security Number, date of birth, and mailing address.
You’ll now dial the collector. When the representative from the debt collector picks up, he or she will probably read a disclaimer, stating that they are a debt collector, and that any information obtained will be used to collect on a debt. In most cases, the collector will also state that the call is being recorded.
All of this is very standard. Debt collectors are required to offer certain disclaimers (under the FDCPA), and to tell you that the call is being recorded.
You’ll want to tell the collector that you are seeking more information about a collection account. At this time, you’ll also want to mention that you are recording the call.
There is no need to explain why – unless you’re asked. In this case, you might want to say “I just want to make sure we’re on the same page” or “I want to have track of this call – I’m just trying to get more information about this account.”
If the collector says that the call cannot be recorded, or hangs up, don’t worry too much. You have other strategies to address this debt.
Assuming that the collections employee has no objection to the call being recorded, you’re in luck. You’ll probably now be asked to provide the collector with your name, Social Security Number, and perhaps your date of birth. This information is used to identify your account.
Now, the real work begins. You need to convey to the debt collector that you’re disputing the debt – without using that word. Remember, your goal is to trap the debt collector in a legal violation.
You should first tell the collector that you don’t ever recall doing business with the debt collector listed. That’s completely true. Even if a collection account does belong to you, you never signed any kind of agreement with the debt collector.
This does not mean that it’s illegal for the collector to collect on the debt. However, stating that you’re not familiar with the collector, is always a good place to start the discussion.
You also don’t know that the amount owed on the debt is correct, and that you disagree with that amount. Remember, you don’t know that this amount is not correct – we can’t be sure either way. This is another thing to argue about.
You’ll now want to use a more blanket denial of the debt. You should inform the collector that you think there might be a number of things that are wrong about the debt – so you disagree with what is being reported. You don’t think that it is correct.
At this point, the collector might assert that the debt is in fact valid. Or, perhaps they’ll start talking about payment options, and trying to get you to make payment on the debt. Either way, the collector is very unlikely to admit that the debt is invalid or not being reported correctly.
At this point, your main objective is to get off the phone. You have made contact with the collector, and made it clear that you don’t think the debt is being reported properly. There is nothing more to be done. You want to thank the collector for their time, and hang up the phone.
As with so many things in life, this process is easier to complete, when you have a clear roadmap. Below, we’ve provided a script, which gives you an idea of how the call might go.
While each phone call is different, reading this should give you some ideas. You can use this script to practice how the phone call might go.
Collector: Good morning, this is Sarah from ABC Debt Collection,on a recorded line. We are a debt collector, and this is an attempt to collect a debt. Any information obtained will be used for that purpose. How can I help you?
You: Hi Sarah, this is Jake, also on a recorded line. I’m calling about a debt which is on my credit reports, and is listed with your company. I’m trying to get more information about this debt.
Collector: Sure, no problem. May I have your full name and Social Security Number please?
You: Yes, my full name is Jake Peterson, and my Social Security Number is 123-45-6789.
Collector: Thank you sir. OK, I see that this debt is from XYZ Original Creditor, and the amount owed is $524. Would you like to make a payment?
You: Thanks for the information. So here’s the thing, I’m not really familiar with your company. I don’t remember us ever doing business together. So, I’m not sure that this is correct. Also, for that reason, I”m not sure that this amount you claim I owe is in fact correct. Really, I don’t think that you’ve listed this debt correctly on my credit reports. I disagree with what you’re saying.
Collector: I understand sir. Would you like to make a payment on this debt?
You: No, sorry. Like I said, I don’t think that this debt is listed correctly. Thanks for your time, have a good day.
You: (hang up phone).
Good work! At this point, you’ve contacted the collector, and conveyed that you believe the debt is being reported incorrectly. You’ve said this at least twice in the conversation, so there’s little room for doubt.
Now, you wait. For the next 8 weeks, you want to keep an eye on your credit reports. We suggest monitoring your reports through Credit Karma and Experian. Credit Karma will provide you with your Equifax and TransUnion credit reports, while Experian (obviously) provides your Experian credit report.
More specifically, you’ll want to keep a close eye on the collections account which you made a phone call for. At some point during the 8 weeks after you disputed the account, the account should be marked as “disputed.”
What does that look like? On your credit reports, it will say something such as “Consumer disputes” or “Disputed by Consumer.” This will appear in the “Comments” section of the account, which is provided by both Credit Karma and Experian. In most cases, the account will appear as disputed.
If, after 8 weeks, the account is not marked as disputed, then you may have grounds for a lawsuit. However, you’ll first want to confirm, from an official credit report, that the account is not marked properly. While Credit Karma and Experian are very useful, they’re not neccessarily the most official (direct from the bureaus) credit reports.
For this reason, you’ll want to order your official credit reports, from Annual Credit Report. Save these reports as a PDF file. Check again to confirm whether or not the account has been listed as disputed.
If the account has been marked as disputed, that means that the debt collector has met at least one of their many legal obligations. This means that on the grounds of not having marked your account as disputed, you cannot sue them. However, you might have other legal grounds to sue.
If the account was not marked as disputed, you might have grounds for a lawsuit against the debt collector. You’ll want to speak to an attorney, who specializes in Fair Debt Collection Practices Act issues.
In many cases, the attorney can negotiate a deletion of the account, along with some sort of monetary settlement. Here’s what is also great: Attorney’s fees are usually taken out of or paid through any settlement. So, hiring the lawyer to represent you, costs nothing out of pocket.
Here at Tier One Credit, we can suggest an attorney in your state. Schedule a call with our team here.
Method #2: Tell The Debt Collector You Won’t Pay The Debt – And See If They Follow The Rules
When you inform a debt collector (in writing) that you won’t pay a debt, they have to follow a very specific set of rules. The FDCPA states that if a consumer tells a debt collector that they won’t pay a debt, the debt collector must cease all communications with you – with two important exceptions.
First, the collector can contact you, to inform you that collections efforts are being terminated. This means that the collector will no longer contact you, seeking payment on the debt. This also means that the account will be removed from your credit reports.
There is another reason why the collector can still contact you. They are allowed to reach out, and inform you that they might (or will) “invoke specified remedies which are ordinarily invoked by such debt collector or creditor.” What does that mean?
Most often, it means that the debt collector is planning on suing you, to seek payment on the debt. Or, if the debt does not appear on your credit reports, the collector could inform you that they’ll now report the account to one or more credit reporting agencies.
Outside of these two instances, a debt collector cannot contact you. Once again, debt collectors often fail to follow these rules – especially if you approach things in a certain way.
You now want to write a letter to the debt collector, informing them that you will not pay the debt. However, you’ll want to do this subtly. Remember, you want to force the collector to comply with their legal obligations. There’s no reason to make it easy for them.
In your letter, you should tell a story, which includes a single line, stating that you will not pay the debt. By doing so, you’re triggering the FDCPA rules, which limit a debt collector’s further collections efforts.
Many of our clients are under financial distress, and so cannot pay a debt. We encourage them to write a letter, explaining the specific circumstances they’re facing, and stating that this is why they won’t pay the debt. Below is one such letter, which we’re sharing with our client’s permission.
Dear Portfolio Recovery Associates,
I hope you’re doing well. My name is _______.
I’m writing to you about a debt I”m dealing with, and I”m told that you’re the folks I should talk to. Hopefully you can help.
About a year ago, I lost my job, working at Kroger here in ______. I had to collect unemployment, and was facing difficulties with even paying for things for my family. I made the
rent, but it was late a couple of times actually.
It took me a while to get things figured out, and find another job. I’m now at a smaller store locally, and it has been good so far. The thing is, my finances are still in a pretty rough spot. I’m hoping things get better, but we will see.
That’s where I am right now. That is also why I am not going to pay this debt. I just don’t have any real idea of when things will get better. So, I need to hang on to the money that I have. It’s rough.
I hope you understand. I just wanted to give you a heads up about this. Wish you and your family good health, and take care.
Sincerely,
_________
This letter is excellent. It’s sincere, and uses simple language. It’s easy to understand, and cordial.
Our client stated her refusal to pay the debt, but it puts it in the form of an authentic story. Everything our client said here is true, in that she did lose her job, and was facing serious financial challenges.
This brings us to another point: Don’t lie. First off, it’s not right. Second, it’s not needed.
You can tell a truthful story, which makes it clear why you won’t pay a debt. As with so many things in life, the truth is much simpler than a lie.
The other key is to include, sort of “buried” in your letter, the fact that you refuse to pay the debt. Don’t use the word “refuse.”
Instead, say “I will not pay this debt” or “I am not going to pay the debt.” By doing so, you make it clear that you will not pay the debt, but you’re also not making it totally obvious that you are trying to do.
You’ll want to send this letter by certified mail. It’s now time to wait, for the next 8 weeks.
You want to see whether the debt collector again makes contact with you. If they do, what’s the purpose of the contact? If they say they’re stopping all collections efforts on the debt, then you have nothing more to worry about.
If they inform you that they’re pursuing a lawsuit, you should immediately contact an attorney. However, since you’re not disputing debts which are more than $1,000, you’re not too likely to find yourself in court. It’s not impossible, but not that likely.
What if the collector contacts you, and states that they are willing to settle the debt for less? Or, what if they write back to you, with an updated bill, and proof that you owe the debt?
These are two very common responses by debt collectors, when they recieve this sort of notice from you. In either of these instances, the collector has violated the law.
Remember, they were only allowed to contact you to state that they’re ceasing collections efforts on the debt, or that they’re taking legal action (or another action they might normally take). Sending you proof that you owe the debt, or even offering a reduced payment amount, is not legally allowed.
When you informed the collector that you would not pay the debt, they were required to cease all contact, outside of the two exceptions above. If you follow the steps above, and are still hearing from a debt collector, then you should contact us.
You may have grounds to sue. As part of a settlement, an attorney can typically negotiate a permanent deletion of the account, and get the debt collector to cease all collections efforts.
The Final Word
Interacting with debt collectors is not fun. However, with the strategies we’ve detailed above, you can greatly increase your chances of succesfully removing collections, and getting paid by the debt collectors.
These strategies do require patience, and willigness to learn. If you’re willing to do that, you’ll find that they’re very powerful.
Give it a try today. As always, if you want help, we’re here to offer our guidance.
