How to Deal With Credit Card Collections
Consumers use credit cards for different reasons. When you receive an extension of credit, the issuer of that credit expects you to repay it. If you fail to make payments, the creditor may pursue that account with the help of a collection agency or may sell it to the collector outright. If this happens to you, it's important to know how to deal with a credit card collector.
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Instructions
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Read the collection notice sent by the debt collector. Under the Fair Debt Collection Practices Act (FDCPA), within five days of contacting you, the debt collector must send you a notice that includes the amount owed, name of the collector, the collector's contact information and verbiage that specifies that the letter is from a debt collector and any information you provide will be used for that purpose.
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Request debt validation. The FDCPA requires debt collectors to prove that the debt belongs to you and the amount of that debt is accurate. From the date of the initial call, you have up to 30 days to request validation; otherwise, you lose this right. Send a debt validation letter to the collector via certified mail.
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Order your credit report while you're awaiting debt validation. The Fair and Accurate Credit Transactions Act (FACTA) gives consumers the right to receive one free credit report each year from the three bureaus: Experian, Equifax and TransUnion. You can order the reports online from the government's official site, Annual Credit Report (See Resources). You can also order the reports by phone or mail.
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Check each report thoroughly. Under the FDCPA, a collection agency is not allowed to place a collection account on your report within the first 30 days of contacting you. You can file a dispute with the credit bureau to have that account removed if they do. File a dispute online at the credit bureau's website, or by phone or mail using the bureau's contact information found on your credit report.
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Negotiate with the collection agency if the debt is valid. Offer a lump sum amount less than the total amount owed. For example, if you can afford to pay $800 of a $1,000 debt, offer $500. If they accept, you have saved yourself $300 or if they counter, you have left room to negotiate. If you can't make a lump sum, discuss monthly payment arrangements. Whatever agreement you reach, get that agreement in writing before making any payments.
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Tips & Warnings
Until the debt is validated, the collector is prohibited under the FDCPA from contacting you again until they are able to do so. Once the debt is validated however, the collector may resume collection activity. Debt validation may include billing statements from the original creditor, signed sales receipts or a signed contract.
After the first 30 days, the collection agency is allowed to add the collection account to your credit report. On the other hand, if a collection agency is unable to validate a debt, it is not allowed to place it on your credit report ever. Remember, only accurate data may appear on a report under the Fair Credit Reporting Act.
Watch out for zombie debt. According to Forbes, this is debt that has passed the state's statute of limitations and therefore, you are no longer legally responsible for it. Bill collectors buy old debt then try to get you to pay it. Check your state's statute of limitations before paying an old debt.
