I felt nervous every time I heard that ring tone.  Looking at the caller ID, it was an 800 number or an ‘Unknown ID’.  I knew who it was.  And I chose not to answer.

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.

If you are getting calls and want them to stop, you can do that easily.  Answer the phone.  I know, you don’t want to, but answer it.  Get the following information from the person you talk to:

• The collection company name.
• The mailing address of the collection agency.
• A supervisors name.
• The name of the person calling you.

Also, write down the time and date of the call, and anything you can recall being said.  You don’t need the peoples names, or the time and date, unless they don;t stop calling you.  In that case, if you pursue legal action for a violation of your rights, that information will be critical.

Write a letter to the collection agency.  In your letter, be nice but firm.  Have it say something like this:

To whom it may concern,

You are causing me undue stress by continuing to call me regarding a supposed debt.

Do not contact me by phone any longer at the following number:  (713) 555-2167.

If you wish to contact me, you may write me at the address you have on file.

If you continue to try to contact me by phone, I will be forced to take legal action under the FDCPA.

You have 5 business days to comply with this letter.

Sincerely,

Me

Now, a couple of key points.  It is a ‘supposed’ debt.  Never admit it is your debt.  They can use that to sue you.

If you aren’t allowed to be called at work, say so.

They can’t cause you to feel nervous, so tell them your calls are causing stress.

Send your letter certified mail, return receipt requested, and make sure it is there in at most 3 days.  That way they can set up their auto dialers to stop calling you.

Keep a copy of the letter, and your receipt from the mailing.  If they continue to call, contact your state’s attorney generals office.

I’d like to know, have you had problems with a collector continuing to call?  What do you think of collections in general?  Leave me a comment and let me know.

My latest Ask Brent video discusses this.  You can watch it here: httpv://www.youtube.com/user/MyCredEd.

Remember to ask your questions about credit and debt in the form to the right.  I will answer via blog or video as soon as I can!

When you fill out the form, your question goes straight to my email inbox.  I am an email addict, so I will see it quickly.  If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.

My latest Ask Brent video discusses this.  You can watch it here: httpv://www.youtube.com/user/MyCredEd.

Remember to ask your questions about credit and debt in the form to the right.  I will answer via blog or video as soon as I can!

When you fill out the form, your question goes straight to my email inbox.  I am an email addict, so I will see it quickly.  If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.

My latest Ask Brent video addresses this.  You can watch it here: httpv://www.youtube.com/user/MyCredEd.

Remember to ask your questions about credit and debt in the form to the right.  I will answer via blog or video as soon as I can!

When you fill out the form, your question goes straight to my email inbox.  I am an email addict, so I will see it quickly.  If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.

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 scenario is called a ‘pay for deletion’. The collection agencies hear this request quite a bit, and they will have a policy for dealing with it. Some of them will not delete the item from your report. They will notate you report that you have paid, but will not delete it. Others are more than happy to delete the item for you after your check clears.

There are a few things to keep in mind if you choose to pursue this path:

• They are going to want the full amount. More than likely, they won’t delete for a settlement amount.
• Never do anything with a collector by phone. Make sure they sign a letter stating that they will delete for you.
• Pay by certified funds that you can track, and KEEP THE RECEIPT! If there is ever a question about your payment, you need to be able to prove that you did indeed pay.

If they won’t deal with you, then you can make a choice about the payment. A paid collection is better on your credit scores than an unpaid collection, but the decision to pay is up to you.

Remember, when you send in a PFD letter and they sign it, that letter becomes a legal document. However, you have to pay before that document is enforceable.

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. If you stop paying, they will try to contact you and ask why. They will be persistent. They will want to ask you why you aren’t paying any more.

If they don’t like your answer, and you don’t take care of the problem and start paying again, the collection agency may find that you are a good candidate for a law suit. After all, you could pay them for a while, so you should be able to keep right on paying.

Remember, a Promise to Pay is NOT usually a legal document, because you aren’t signing anything. However, the collect will treat it as if you mean to tpay them. They are going to base their predicted earnings on this promise, and they will want their money.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

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.

In Colorado, both promissory and open-ended credit arrangements have a 6 year statute of limitations. In Ohio, promissory is 15 years, and open-ended credit has a 6 year SOL. In Arkansas, they really like the consumer, and have a 3 year SOL for both types of credit. Each state has different laws, and the SOL will vary. There may also be a variance in how the state defines the start of the SOL. In some cases, it is when the account becomes ‘due and payable’, or in other words when the creditor decides you aren’t going to pay and exercises their right to collect the full amount. In other states, it starts when the account is defaulted on, and can be reset based on other activities.

So what determines the law in your situation? That can be a bit tricky. When you fill out a credit application, you are agreeing that the company issuing credit can come after you for unpaid amounts. If you default on the debt, they have the right to collect their money, plus interest, penalties, and fees. Let’s take a look at a couple of common clauses in an agreement:

• Controlling Laws: “This Agreement shall be governed by and construed in accordance with federal law and applicable laws of the State of Florida…”
• Collection Costs: “In the event you default in the performance of any of your obligations under this Agreement … you agree to pay all court costs and collection expenses allowed by law, including reasonable attorney’s fees.”
• Default: “…All rights and remedies of the bank are cumulative and may be pursued singularly, successively, or together, at its sole option.”

You never read the fine print, did you? Well, they have you no matter how you look at it. If you default on your credit, and the reason you default is NOT the credit issuers fault, you owe them the money. How could it be their fault? Only if they have charged you for something that was NOT in the agreement, and you didn’t pay for it. Otherwise, the fees they charge are all legal, and, in fact, you agreed to them.

Now, how do they go about enforcing these clauses in the contract? Well, for one, they have fees. If you go over your limit, or you are late on a payment, they may ding you for 30 dollars or more. Most people will call in and see if this can be waived, but they have the right to collect those fees from you. Again, it is your responsibility to manage your card.

For a more significant problem, like a defaulted debt, a credit issuer will turn the account over to some collection process. This may be a debt collector, an internal attorney for lawsuit, or an external legal firm for action. When they do that, the collector will be calling to chat about the situation. They want their money, and they will do whatever they can legally to get it. They are faced with a dilemma, though, which is this: How long will it be until I can’t sue this person for the money they owe?

Lawyers have two ways of looking at the statute of limitations. In lawyer terms, a law can be looked at as procedural, or governed by the laws of the state you live in now, or as substantive, which means it is governed by the original contract. To put it into a little more human terms (sorry, lawyers!), I will walk you through an example.

Let’s take Martha, who was living in New York and took out a credit card with a major credit card vendor. Their agreement was governed by New York law. New York has a 6 year statute of limitations on open-ended agreements, so 6 years is the SOL. Martha gets hit by a layoff and ends up defaulting on a $5000.00 card balance. She gets a new job in Arizona, which has a 3 year SOL. A debt collector finds Martha 4 years after the default, and decides to sue her for the debt. Martha hires a lawyer, and they go to court.

Martha’s lawyer argues that the statute of limitations is procedural, and is set according to where she lives now. The collector’s lawyers will argue that the statute of limitations is substantive, and that the debt is still within SOL based on the original agreement. A judge then has to decide who is right.

If the collection company loses that argument, they are out money, as they cannot collect on the debt through a judgment. In Ohio, as an example, a recent ruling states that all open-ended debt is procedural, or based on where the debtor lives now. That can be in your favor (if you move to a state with a shorter SOL) or against you (if the SOL is longer in your new home state). Lawyers take this into account, and may assume that the SOL is always procedural, and take the current states SOL into account when they decide to try to pursue legal action. That way they don’t waste money having to prove they should be able to sue for that particular account.

OK, then, what causes the statute of limitations to be ‘reset’, so that they can go after you longer? The answer here is pretty simple: you make a payment of the old account. What that does is reset the clock to the date that the creditor or collection agency received the payment. So, if you are nearing the statute of limitations for an account based on where you live, making a payment will start you over.

Which leads us to a move. If you are in a state with a 3 year statute of limitations, and you defaulted 4 years ago, the collector can’t sue you for the money. If you move to a state with a 6 year statute of limitations, and the default was less than 6 years ago, a collector can sue you for the money.

So, what if you are beyond the statute of limitations in your state, are you safe? Well, probably. However, be aware that due to how backed up our court systems are, your case might not get in front of a judge for 18 months or more. The statute of limitations covers the filing date of the law suit, not the actual date in court. If a lawyer has filed prior to the SOL date, you will still have your day in court.

While this may seem confusing, it boils down to this: You can get sued as long as the statute of limitations is not passed. After it passes, they can’t sue you any more, but they can continue to pursue collections from you.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.

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.

According to Fair Issaac, the company that provides credit scoring formulas to the major credit bureaus, any item that is settled may be shown as ‘Not paid as agreed’ or ‘Settled’ will have a serious hit on your credit scores. A single occurrence, such as one charged off card, is bad enough. You can lose 60 or more points from that one occurrence. Having several, though, is seriously bad for your credit. And that means your interest rates can go up, your insurance can go up, and you can be denied credit. These negatives will stay on your report for 7.5 years, although the scoring models start to discount the impact of a settlement after about 2 years.

But the noticeable cost of a ‘debt relief’ or ‘debt consolidation’ company is more real than just an interest rate increase. Like all businesses, they want to make money. And they have things set up so that they do exactly that.

Here’s how it works: The first thing you do is turn over all of your debt payments to the counseling company. They work out payment plans with your creditors, at a reduced interest rate, a reduced balance, or both. You send your money to the counseling company, and they make payments for you. Eventually, you are out of debt.

Simple, right? Well, not really. There are two primary ways consumer credit counseling firms make their money. The first way is through up-front fees. You have heard companies advertising that you have to have $10,000.00 in debt or more to qualify. Well, they are going to negotiate about a 50% reduction in your debt, mostly in interest, and then charge you between 10% and 40% of your debt load as a fee. So, taking $10,000.00 in debt as an example, let’s see how that pays out:

Debt: 10,000.00

Reduction in debt: 5,000.00 (50%)

Fees: 4,000.00 (40%)

Savings: 1,000.00 (Yikes!)

The second way they go after your money is by charging you a fee for each payment they make on your behalf. Again, that fee ranges between 10% and 40% OF YOUR PAYMENT AMOUNT! Think about it: You send in $100.00 in payment, and they keep 40 bucks. Only $60.00 of your payment reaches the creditors! You talk about high interest, this is the equivalent of paying 40% more than the interest rate you already have on the card itself. Personally, I don’t see the benefit here.

The long term effects are even worse. Let’s say, just for the sake of discussion, that you had 5 cards that you wanted to settle. Those 5 negatives on your credit report will be there for more than 7 YEARS!!! Just think about it: Your life improves, your income is better, you want to buy a house 4 years from now, and you can’t get a mortgage. Or, you get one, but pay 5 percent above market rate, costing yourself several hundred dollars a month in additional interest. Again, probably not the best solution you could come up with.

These debt consolidation companies have more ways of messing with your funds, your accounts, and your credit standing. If you really need help, look for an agency that is a member of the National Foundation for Credit Counseling (NFCC, http://www.nfcc.org). Remember that radio and TV ads are expensive, and they are being paid for by your money when you sign up. Another resource is the Department of Justice at http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm. You can also check with your local Credit Union. Many have free services for their members that include debt counseling at low or no cost.

You can do this yourself. You can negotiate with your creditors, getting a lower interest rate and making payments over time without a substantial penalty. You may get a ding on your credit report, but you can usually ask them for a goodwill removal when the payment plan is complete.

To sum it up, many debt relief companies are in business not to help you, but to help you part ways with your hard earned money. If you really need help, find a reputable firm. Or spend a little time and do it yourself. You’ll feel richer in the morning.

To get a copy of my FREE e-Book ‘The Top Ten Ways You Can Wreck Your Credit’, just click the link.  You will be taken to a page where you can get more information about downloading the e-book.  This book tells you what you should avoid doing concerning your credit, and what negative impacts can occur if you treat your credit wrong.