A collection account is one that has been sent out by your original creditor to the collection agency after you have missed several payments. This normally happens when you ignore creditor’s letters or calls or when you are unable to work out a payment or settlement plan agreed earlier with your creditor.
Your account will be turned over to the collection agency, usually after 90 to 180 days of missed payments. The usual types of debts that are sent to collection agencies are credit card debts, unpaid medical and telephone bills, other utilities and government debts, even student loans.
Once your debt is sent to the agency, the collection agency will have to contact you, either by phone or letter, in order to make the necessary collections. This happens if they have your correct contact information. If they do not have your correct number or address, you will only know that your account is in the collections once it is listed on your credit report.
Experts say that a collection account is probably one of the worst accounts on your credit report. Your credit score will drop if a collection appears on your report because this means, you have been delinquent on your payments.
This may then stay on your credit report for the next seven years. This may certainly impact your ability to gain credit in the future. You may find it hard applying for new loans or credit cards because of this particular item on your credit report.
Fair Debt Collections Act
Debt collectors are bound by the Fair Debt Collection Practices Act. Such Act prohibits certain types of abusive conduct on the part of the agency. Included in the provisions of the act are the following:
- Contact hours and contact at work. They may not contact you at any inconvenient time and place. They can’t contact you before 8 am and after 9 pm, unless you allow them to. They also cannot contact you at work, both orally and in writing, when they are told.
- They are not allowed to call you repeatedly or continuously in order to annoy or harass.
- They are prohibited from contacting you when you are known to be represented by an attorney.
- Abusive and profane language in debt collection is prohibited. Likewise prohibited is threatening you of legal action that is neither permitted nor actually contemplated.
- They are not supposed to contact third parties like your neighbors, friends or family and disclose the nature of your debt. They may only contact these people for the purpose of getting your location and contact information.
Fair Debt Collections Practices Act Violations
However, a lot of these collectors do not really abide by law as evidenced by the thousands of complaints reported by consumers against collectors each year.
How do you settle a collection account?
If you have certain reservations, do not hesitate to file a dispute with each of the three credit bureaus. They will have to verify if the debt is true and correct. Now, once you have verified the accuracy of your debt and determined that such is really yours, it is time to contact the collection agency. Speak with the supervisor or manager.
Do not speak with anyone who cannot make any decision on matters related to your debt settlement. Try to negotiate your debt for as little as possible. Experts suggest that you can begin by offering to settle for as low as 25% of your total amount due so that you will have greater buffer as you go up.
Gradually increase the percentage of your settlement offer up to 50 or 60%. Try to not go beyond. Collection agencies would rather agree to be settled for less rather than not being paid at all.
Once you have made the settlement agreement, demand that it be made in writing. Pay your debt. Once paid, try to request that a deletion request be sent to each of the credit bureaus to erase the trade line from your credit history.
If the agency will not agree to this, make sure that the trade line will be reported as “PAID, as agreed” or “Account Closed, PAID”.
When Do You Need a Debt Collections Lawyer?
If you are treated unfairly by your collectors, if they frequently call you at home and in the workplace, if they threaten you of a lawsuit, you might need the services of a good attorney. The attorney can protect you from your over eager creditor.
He or she can assist you with the paperwork and the legal issues of your debt. If a legal action is taken against you by your creditor, the lawyer can represent you in the lawsuit.
He/she will protect your rights. Further, he/she can help you negotiate with your creditors and try to work out a payment plan for you. In addition, your attorney can help you deal with those annoying calls and the frequent showing up at your doorstep.
If you need help with debt collections, call us. You can speak to an attorney or debt paralegal for free—with no obligation.