Brent's Credit and Debt blog

Finally, I got smart. There is a law, Called the Fair Debt Collection Practices Act, or FDCPA, that regulates how debt collectors are allowed to contact you, including how often, where they can call, and what they can say.

They are easy to hate, aren’t they?

They call you and demand money for something you couldn’t pay for in the first place. They try to help you ‘find’ money by taking out additional loans, or by borrowing from family. They want you to make payments. They are even willing to waive the interest they charged you.

The law prevents harassment by a debt collector. It is harassment if they call you at work?
My latest Ask Brent video discusses this. You can watch it here: httpv://www.youtube.com/user/MyCredEd.

The statute of limitations for your state determines how long you can be sued for a debt. However, if you treat your debt wrong, the state of limitations can be reset and the clock starts over.

The debt collector can get a lot of information about you. However, do they have the right to see your bank records?

Often, a collector will be willing to give you a concession on your credit report if you pay the full amount owed. Let’s say you have a $200.00 balance on a credit card that the collector purchased. They want that 200 bucks. They didn’t pay that much for it, but they do want the face value of the money. If you write the collector, and tell them you are willing to pay the full amount, but they are going to have to delete the item off of your credit reports when you finish paying, they may very well do just that.

This schedule is called a ‘promise to pay’. The collector will be happy to set this up for you. If you make the payments on time and on schedule, your debt will soon be gone and the whole episode is over. If you fail to make a payment, however, the collector gets a bit grumpy. Once you start making payments, the collector knows that you are able to make the payment.

You aren’t going to believe this, but it’s true. Here is the secret behind debt collection: creditors want their money! OK, I am being kind of irritating there, but that is what drives debt collection. How the process works, however, is pretty interesting.When you apply for debt, the creditor decides if you are credit worthy. They do this based on your income, your past payment history, your line of credit to used credit ratio, and your credit scores. It takes a computer about 1 second to make this decision.

Each state has its own set of laws regarding SOL. In fact, each type of debt has its own statute of limitations. There are really two primary kinds of debt most of us get into; an open-ended agreement, and a promissory note. An open-ended agreement, like a credit card, has a varying balance, and not strict payment schedule. In other words, that payment amount change based on the balance of the account and the interest rate. A promissory note is commonly found in a car loan or mortgage, where all the terms are spelled out and the payments are on a fixed schedule, with fixed and well-known amounts.

Right. Your credit card companies really want to work with you. They want to say “No, really, keep your money. We were being aggressive and rude. Please, don’t pay us a cent”. Did you sense the sarcasm here?

The truth is that creditors want to be paid. When they are faced with a choice between getting nothing and taking a lesser amount, they might bend, but they are going to do their best to make sure you feel some pain. In this case, pain is going to be felt in 3 ways: A reduced credit line or cancelled card; additional legal or collections fees; and a seriously bad mark on your credit report.