Every day, hundreds of thousands of consumers are contacted by debt collectors regarding delinquent debts. As a debt collector myself, I can tell you that getting a debt collection call is not on anyone’s list of favorite things and never will be. In fact, it probably ranks dead last. Unfortunately, avoiding a debt collector isn’t the answer, either.
While there are some horror stories out there about consumers’ bad experiences, also consider this: With an estimated one in three adults with an account in collections, less than one in 250 debt collection calls (less than half of 1% of all debt collection calls) generated a complaint with the Consumer Financial Protection Bureau in 2014, while one in 40 debt collection calls ended with a payment. The reason I reference these numbers is to show that the odds are having a professional and respectful debt collection call are heavily in their favor. But communication is key.
So when a debt collector contacts you, it helps to know your consumer rights, as well as what steps you can take to can help resolve the outstanding debt. It’s also good to know what a debt collector will likely ask you… and why they’re asking it.
Verifying Your Identity
Before a debt collector can provide you with personal and confidential information about your account, they’re required by law to take precautionary steps to protect your privacy. Once a debt collector has verified you by first and last name, most debt collectors will ask you to provide one or more pieces of information to confirm your identity. Generally, the last four digits of the Social Security number or date of birth is requested before discussing the debt further. (Note, however, that debt collectors do not generally request the entire Social Security number.) If the consumer fails to provide this information as requested, it is likely the debt collector will not proceed any further with the phone call. Some consumers may think this is a positive step that gets a debt collector to go away, however it only escalates the collection process as the debt collector and creditor will have to look at potential involuntary methods to recover the outstanding debt.
Obtaining Details About Your Situation
Before a debt collector can determine what options they have available to assist consumers, it is important for them to understand the reason for delinquency and what the current hardship is. The reason for delinquency is needed to update the consumer’s records and communicate back to the creditor what caused the delinquency in the first place. The current hardship also is updated on their record and helps the debt collector gain an understanding of their current situation in order to determine what repayment options are available for them. If a consumer does not provide these critical pieces of information, a debt collector’s options to help them can be limited.
Determining Your Options
Once consumers have provided the debt collector with the reason for delinquency and current hardship, the next step is to determine their options. Depending upon several factors, in addition to their current hardship — the time the account has been delinquent, account balance, employment situation and other information are all used to determine available options. Aside from paying the balance in full, debt collectors may be able to offer settlements to pay less than the full balance or monthly payment arrangements on the full balance. Consumers should ensure they understand all the options available to them and select the repayment option that best suits their situation.
Why It’s Important to Stay In Communication
One of the worst things consumers can do is deliberately avoid communicating with debt collectors. Most consumers tend to communicate with the debt collectors only when they are in a position to start repayment. While that is great, it is also just as important for consumers to communicate with debt collectors when they aren’t in a position for repayment as well. Once a debt collector understands a consumer’s situation and especially when a consumer isn’t in a position to repay presently, it will change how they handle the account. While debt collection calls may continue, they will be much less frequent when the debt collector is aware of what is going on with the consumer. So even if consumers are not in a position to pay, consumers should take the time to speak with the debt collector if for nothing else than to update their records.
If you have a debt in collections, you may want to check your credit report periodically for accuracy and any updated information regarding your debts. You may also want to check the status of your debt with the statutes of limitation. You can get your credit reports for free once a year through AnnualCreditReport.com, and you can get a free credit report summary updated every 14 days on Credit.com.
More on Managing Debt:
- Understanding Your Debt Collection Rights
- The Best Way to Loan Money to Friends & Family
- Top 10 Debt Collection Rights