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Coping With Collection Agencies

If you fail to meet the repayment terms of your contract with a creditor, you will receive a number of letters informing you of this failure and requesting that the terms be met and payments be made. If the creditor fails to get you to conform to the terms, they will very likely send your case to a collection agency.

Collection agencies work on behalf of the creditor to recuperate the amounts owed by debtors. It is important to understand that the agency's interests lie with your creditor and not with you. It is also important to understand that these agencies are highly professional and experienced in dealing with the psychology of debtors.

Collection agencies get a percentage of debt collected. They may charge other fees for time they put in, so may tend to be aggressive. A few may go overboard, which can work in your interest. There are legal constraints on the actions permitted of collection agencies. If they do act illegally you can sue or threaten action and get a renegotiation of the terms of your debt. Creditors understand this, and you must refer all unethical action of a collection agency to your creditor as well as to state or federal agencies which govern the activities of these agencies. At the national level, the Federal Trade Commission ( ) is a central resource. There are state agencies as well. See our State Regulatory Agencies page to find the agency in your geographical area to report to.

If you have a legitimate dispute with a creditor, make sure the collection agency knows the details of this. A number of agencies will not wish to deal with consumers with legitimate complaints against creditors.

The collection agency is interested in recouping as much of the moneys owed as possible. But they and your creditor both realize that it may not be possible to recover 100 percent of the amount owed. Understand that you are in a bargaining position to the extent that the collection agency can convince your creditor to accept some fraction of the outstanding debt if this is what is within your means and if you can make this payment over a shorter period or even in a lump sum. You will have to make a convincing case of the limitations of your means.

You can formally request that a collection agency stop contacting you. After this, they are obligated to stop and may only contact you specifically to:

1) Note termination of collection procedure
2) Note specific impending formal action against you such as a lawsuit.

Behavior Forbidden of Collection Agencies By Law:

To prevent abuse and overly aggressive behavior, the law forbids certain actions by collection agencies. A collection agency or its employees may not:

• Contact you at inopportune times. They must not contact you before 8:00 am or after 9:00 pm

• Contact you at your place of employment if your working situation forbids this.

• Use harrassing or abusive language in communication with you. This includes obscenity or clearly offensive language.

• Threaten to embarrass or publicly defame you or any other friends or relatives of yours.

• Make the nature and status of your debt public.

• Misrepresent themselves as any other than what they are. They may not mislead you into believing they are agents of law enforcement or state or federal government.

• Make threats implying intended action which it does not intend to take. The agency must be precise about whatever legal action it proposes to take against you.

• Contact a third party except to determine your location. They may not contact a particular third party more than once except the third party requests this or if the latter gives erroneous information to the collection agency.

• Inform such a third party of your debt or of their status as a collection agency. Communication which divulges the nature of your debtor status is illegal.

• Intentionally make calls at your expense, e.g. through collect calls.

• Alter your outstanding debt by adding fees and interest charges foreign to your initial contract with the creditor or not mandated by law.

• Request a check from you post-dated by more than five days unless they inform you in good time prior to depositing the check. This information must be given between three and ten days before check is deposited.

It is not uncommon for collection agencies to break a number of the laws described above. If this occurs, make sure your creditor and the local state regulatory agency overseeing collection activities is informed. See a list of consumer protection agencies at our Local Regulatory Agencies page.


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