Tough times can lead to some tough financial decisions. If you start to fall behind on your financial obligations and find yourself struggling to keep your head above water, understanding the collections process and your rights can help keep the damage, both short- and long-term, to a minimum.
If you fall behind on your payments, your original creditor may turn your account over to a collections agency to collect the money owed. Some creditors may do so as soon as the account falls 30 days behind, while others may wait until the account falls past due 90 days or more. In most cases, the original creditor doesn’t have to notify you that your account has been turned over to collections. Likely, your first clue will be a phone call or letter from the collection agency itself.
It’s always best to deal with past due accounts with the original creditor before your account gets to the point of going to collection. When you find yourself falling behind, be proactive and speak with your creditor. Often, creditors are willing to work with customers who don’t avoid their calls and show initiative to resolve delinquencies. Options include arranging for a reduced monthly payment for a specific period of time to keep your account current or negotiating a payment plan to help bring your account current.
If you should happen to find a letter from a collection agency in your mailbox, or be on the receiving end of a not-so-pleasant phone call, it's important you understand your rights. Collectors must send out what's called a “validation notice” within five days of contacting you by phone. Often collection agencies will mail this notice even if they can't reach you by phone. This notice must include the total amount owed, the name of the original creditor and direction on how to proceed if you believe you don't owe the debt. If you believe you don't owe the debt, make sure to send a letter requesting validation of the debt within the 30-day time frame. Send it certified and request a return receipt for your records.
Try to resolve the debt with the debt collector upon first contact. You can stop a debt collector from making further contact by sending a written request via certified mail. This doesn't make the debt disappear, but it does stop the contact. Under the Fair Debt Collection Practices Act, a collection agency cannot harass, make false statements or engage in unfair practices, such as depositing a post-dated check early. Contact your state Attorney General's office if you are having problems with a debt collector and believe they have violated the law.