Dealing with Junk Debt Collection Agencies: Knowing Your Rights

This is the craziest thing we do. When we get a junk debt collector call from some company we make a choice right then.

1. We give them our credit card number, check account, or debit card if we have it.
   
2. We tell them our sob story and that we can make monthly payments and get talked into a verbal agreement. (They usually call from a 1 party consent state) * Party consent means they can record a conversation as long as their voice is on it (1 of the parties being recorded).
   
3. We tell them that we are not paying for one reason or another, we answer all there questions and now they have more information than they did before they called.

I'm going to teach you some things that will save you $1,000's of dollars. Lets begin.

Lets deal with junk debt collection agencies. When you get a junk debt collection agency call this means that an original creditor (some credit card company or medical bill) has sold your debt to them and has written it off as a loss. Therefore the original company gets there tax break from the bill and they're done with it. They sold the debt for 6 or 7 cent on the $1. Lets stop and do the math. Ex. You owed B-Bank $1,000 ($1,000* (7%) = $70). When they call you are they saying you owe $70? Obviously not, they want the $1,000 you owed B Bank. Lets use a even simpler example.

Lets say Robert owes Jason $500. Months go by without payback of the money Jason is getting tired of calling Robert and wasting his time after all Jason is loaded with money anyway. Then Michael comes along and says hey Jason, I'll give you $20 and you let me get the $500 from Robert. Jason says "sure, I'm tired of trying to contact him anyway."

This the first collection agency. The second one pays about 2-3 cents on the $1 and after that they pay one cent or less! I'm sure your ready for the tips now.
These options are not necessarily separate, you may end up doing them all, but the 1st is recommended to be first. This should be the only call.

Scenerio: You are called by a collection agency about a debt, here is how your conversation should go;

You: Hello

Collection: Can I speak with U.O. Meee?

You: Speaking

Collection Call: This is Payme Nou and I'm calling about the debt you owe "The Man"

You: I don't know what your talking about (even if you do), Please don't call me anymore and Hang up.

Collection calling back: You really need to handle this matter or I will recommend that they file against you.

You: Please don't call me anymore and hang up.

After the call you should receive a letter stating the same information. Here are your options

Option 1 (Always Start With this Following the Conversation)

• Make reference to the letter you received and attach it to your letter.
• You should dispute the debt, request that they validate the debt. In writing
• Request they provide you with documentation that they are authorized to collect the debt in your state of residence.
• Request they show you how they calculated what they say you owe.
• Request they prove that the statue of limitations has not expired.
• You will also reiterate that they should not call you at home, work, or cellular.
• Your letter should also state that once accurate documentation is received you require at least 30 days to look it over and that collection efforts should cease and desist (no more letters and calls). I never sign my letters, I've heard of collection agencies copying signatures on fake documents.
• Send this letter certified mail, save a copy for yourself along with the certified receipt.

Option 2 (If You Just Wanna Pay It)

• Even if you just want to pay it, you should make sure that your paying the right company, therefore option 1 should still be used partially.
• Keep in mind that you don't owe them, the company you may or may not owe has already got a tax break.
• Keeping in mind the information about collection agencies, your first offer should be 25% or less depending on if this is the first, second or third collection agency to "own" the account. The more time that has past, the more likely they are looking to settle.
• Never seem to eager remember if this is $1,000 debt, they only paid about $70, so if you offer them 25% ($250 in this example) They still almost quadruple there investment.
• Your offer letter should contain the following and should be written like a contract (because it is a contract); see my sample agreement to compromise debt
  o A statement that certifies the company is legally authorized to collect the debt.
  o Statement saying what the full amount of collection is and another statement saying that they agree to accept of _25% or less__ as full payment on the debt.
  o That they also agree not to take further action on the alleged debt.
  o Upon receipt of the money ordercashier's check (never use your bank), they will remove any information they may have placed on your credit report(s)
  o At statement saying that if they don't remove from credit report, it is estimated that it will cause $10,000 in damages.
  o This Agreement shal be binding to the benefit of the parties, successors, and assignees.
  o Lastly have a statement that says if payment isn't received by a certain date, that it becomes void. (This means they have to send it back with signatures in time enough before the date).
  o Add signature lines and that's it. I usually print 2 copies and number them and require blue ink signatures on both.

Option 3 (Cease and Desist)

• This letter pretty much says I don't deal with Collection Agencies, only original creditors.
  
• I request that you CEASE and DESIST in your efforts to collect above referenced account (attach orig. letter). It is my personal policy not to deal with collection agencies. You are instructed to cease collection or face legal sanctions under applicable Law.

Things to Remember

1. You are not refusing to pay, you are asking for proof that you owe them.
2. Never talk on the phone to a collection agency. You should only have one conversation with them. Tell them not to call you anymore and hang up. All your communications should be in writing and certified mail. This protects you from crook agencies who deny verbal agreements if you don't have proof.
   
3. Keep copies of all letters sent and received, never seem to eager to settle(if you choose that option).
   
4. If you plan to pay it, never use your personal account, get a money order or cashier's check.
   
5. Validate the debt and verify that they have the legal right to collect it in the state you live in.
   
6. Before you send any money get your agreement in writing.
   
7. Make sure your agreement includes your credit rating. On your credit report "Paid after collection" is just as bad as not paid at all (score wise)