- How to Dispute Debt Collections
- Should I Dispute a Debt?
- Important Things to Know About Your Right to Dispute
- How to Dispute a Collection Agency
- Can I Dispute if More Than 30 Days Have Passed Since I Received Notice From The Collector?
- How to Remove Paid Collections From a Credit Report
- How to Settle With a Debt Collector
- Debt Settlement Downsides
- Appearances Do Matter
- The Negotiation Process
- The Bottom Line
How to Dispute Debt Collections
Not paying a bank loan, credit card debt, or another form of debt – this can happen for many reasons, both in and out of your control. If such a situation does occur, the creditor can decide to direct your documents to a collection agency. A collector’s main task is to give you a phone call and apply whatever measures they seem possible to get back that money.
It may seem to be in your best interest to pay it all off and clear your credit report as soon as possible, if you have the money, often just so they stop calling. It sounds logical, but paying a collector agency does not precisely clean up your credit report. This does not, in any way, mean that you should not pay off your debt. You should, but not to collectors. It’s a tricky situation; that’s why, in this article, we will go through the process of disputing collection agencies, how to remove paid collections from your credit report, how to settle, and your rights (you have a lot) in general.
Should I Dispute a Debt?
Your rights to dispute a collection are the principal instrument. When you dispute a debt, the debt collector or collection agency is obliged to halt all their collection activities up until they provide you with proof that you, in fact, owe the money. Debt collection dispute letters will help you along the way, but we will get back to those later. The main thing is that if the debt collector cannot make the proof available, they will never cause you a nuisance again. If, however, the debt collector does provide evidence of your debt, it’s good to know your rights and actions to take, so you will be in a better position to decide what to do about it.
Important Things to Know About Your Right to Dispute
Under the FDCPA, your right to dispute a debt consists of three parts:
- The right to receive notice of the debt
- The right to contest the debt
- The right to verify the debt
Please note that with some of these rights, time limits are imposed. This is important to remember. Within five days before calling, the debt collector or agency has to send you a letter with the following information:
- The amount you presumably owe;
- The name of the creditor;
- Extensive and accurate information about what you can undertake if you have reason to believe a mistake was made or you aren’t in debt at all.
After you have received such a letter, it’s possible to dispute the debt within thirty days.
How to Dispute a Collection Agency
First, you have to send a debt collection dispute letter to the agency. As we mentioned above, you have thirty days to do this. When you dispute a debt, the debt collector or collection agency is obliged to halt all their collection activities up until they provide you with proof that you, in fact, owe the money. At a minimum, this proof must include: the debt amount, the date of debt, and the name of the creditor, but the type of information that must be provided changes depending on your specific circumstances. Follow this link for a sample dispute letter. It will come in handy. Just like with all essential documents, you should always keep a copy for your archive.
Another excellent idea is to send your debt collection dispute letter by certified mail (when a return receipt is demanded). This way, you will have absolute proof that the debt collector received it.
Also, within the same thirty days of the first notice, you may request the original creditor’s name and contact information in written form. This gives you the right and opportunity to also send a debt dispute letter to the creditor. In case you are disputing on the grounds of identity theft or mistaken identity, the collector’s proof or creditor’s claim should include a copy of an original signed contract or written and signed agreement (by you).
In case you never received a written notice from the collector, you can still proclaim your dispute and verification rights. The thirty-day limit will not apply.
It’s important to note that you can dispute a debt by phone, but in this case, the collector agency will be allowed to continue debt collection activities. It won’t be legally obliged to verify anything (send you proof). To declare your right for debt verification, you have to send a dispute letter.
Can I Dispute if More Than 30 Days Have Passed Since I Received Notice From The Collector?
It’s possible, but keep in mind that the collecting agency will be legally allowed to continue their collecting actions, and they will not have to provide you with any proof of debt. If you want to proclaim and use your right to confirm the debt, you must send your dispute letter within thirty days of receiving notice.
If, however, you have an absolute fool-proof defense that you don’t owe any money, you might want to argue the debt even though the thirty-day time limit has passed. Argue in writing, and include any evidence that supports your claims (such as copies of bills, checks, etc.). If the collector knows that you don’t owe money, it should not collect the debt. The FDCPA prohibits debt collectors from making false statements about your debt’s character, amount, or legal status.
How to Remove Paid Collections From a Credit Report
If a collection or a debt on your credit report isn’t yours, don’t pay it. Have the creditor remove it from your account after you formally dispute it, as described before. If a collecting agency keeps a debt on your credit report past the seven and a half years, you have the right to dispute the debt and have it removed. What’s important to remember is that a debt account—paid or unpaid—remains on your credit report and is visible to potential creditors (banks, government authorities, or potential employers) for seven years from the date of the first missed payment on the debt in question.
How to Settle With a Debt Collector
Unburdening all or part of your personal debt via settlement may seem intimidating, but one of the great truths is that you really can negotiate anything. When speaking about money that you owe on your credit card(s), for instance, there might be opportunities to negotiate and settle what sum you actually owe. When you know your facts and are able to show willpower, you can, in some cases, reduce your balances by as much as 50% to 70%.
Debt settlement is a contract between a lender and a borrower for a bulky, one-time payment of part of one’s existing debt in return for the remaining debt’s forgiveness. If you owe $8,000 on a single credit card, for example, you may approach the credit card company and offer to pay $4,000. In return for this big, one-time payment, the credit card company can agree to forgive or even erase the remaining $4,000.
It may sound too good to be true, but you really can negotiate to settle with a credit card company or a collection agency about your balance. As such, it’s no surprise that lenders don’t actively advertise settlement agreements. Independent data on success rates is unavailable, too. The thing is, if the situation is really that you are in debt, harshly lagging on expenditures and free-falling towards bankruptcy, your lender may be willing to take what they can get. This will give them the opportunity to get at least a part of the money back while also giving you one last chance to get back on your feet.
Debt Settlement Downsides
Firstly, settling a debt usually requires you to come up with a considerable amount of cash at once. Precisely this is what makes a debt settlement process so attractive to lenders! You see, as an alternative of (maybe) receiving minimum monthly payments for the next few years is a big risk for the lender since they are aware of your situation. The alternative is receiving a big sum of money now. At this point, if your life situation is difficult, you may want to consider where the finances are going to come from and how, perhaps, that money could be used elsewhere. Make sure that this large one-time payment is not going to leave you in an even worse situation a few months ahead.
Secondly, you are taking the risk of having your credit card account closed completely after the settlement is completed. Unfortunately, your lender (the bank, for instance) may get rid of you as their customer because of your poor credit rating.
Thirdly, debt settlement will affect your credit rating as a whole. This will make it much more difficult for you to borrow money at good interest rates or even to get credit at all in the future.
In case you make the decision that settling with debt collectors is the route you’re going to take, the next step is to decide whether you are going to do everything on your own or hiring a professional negotiator, like an expert from DebtQuest. Many people try on their own first but fail in the beginning since, unfortunately, the debt settlement business has its fair share of con artists, ripoffs, and scams. With DebtQuest, you won’t have to worry about these things.
Appearances Do Matter
Whether you use DebtQuest USA as your professional debt negotiator or not, one of the main things when negotiating a debt settlement is to make it absolutely and unequivocally obvious that your financial situation has hit rock-bottom. If your counterparty is convinced that you’re surely spiraling towards bankruptcy, the fear of losing it all will give you a bigger chance they accept your debt settlement offer.
If your credit card statements reveal many visits to five-star hotels, Michelin-star restaurants, or luxury brand shopping sprees, for example, your counterpart (lender) will be very unlikely to view you as someone in serious help or even worthy of empathy. To escape such a scenario, minimize your credit card spending or even cut it to zero for a period of three to six months before you apply for a debt settlement.
The Negotiation Process
Begin by phoning your credit card’s customer service department and asking to speak to someone, preferably a manager, in the “debt settlements department.” Explain how awful your life situation is right now. Make sure to tell them about the fact that you have managed to get a fair share of cash together, and your hopes are high that it’s possible to get a debt settlement on your account instead of that money going to another organization. Please note that if you have more than one account on which you would like to start a debt settlement process, you will, most likely, get a competitive offer.
We advise you to offer the creditor a specific amount in dollars – about thirty percent of your outstanding account balance. The creditor will most probably try to argue a higher percentage or amount of money. If your lender suggests anything above 50%, consider trying and settle a different lender or merely putting off the deal and saving up the existing funds to help pay future bills.
Lastly, but nonetheless just as important: once you’ve finalized your debt settlement with your creditor, make absolutely sure to get the contract/agreement of the settlement in writing! Unfortunately, it’s not uncommon for a lender, like a credit card company, to verbally agree to a debt settlement to turn over the remaining balance to a collection agency. Be sure the written agreement spells out the amount you have to pay in order to have your entire balance excused from further payment.
The Bottom Line
Collectors are specialists who provide debt recovery. They usually work with lenders of large banks or work on the sidelines of microfinance organizations. Their goal is to get the defaulter to return the money at almost any cost. In the United States, collectors appeared in the 60s of the XX century. In the 80s, such firms began to open in Europe.
Settling with a debt collector is a real thing and should encourage people who owe money to at least try. But don’t hang up the phone and hide under a rock if you’ll hear a “no” somewhere along your way. Don’t give up. As we mentioned at the beginning of this article: everything is negotiable. Instead of walking away, inform your creditor if, for instance, it can lower your annual percentage rate (APR), reduce your monthly payment, or provide you with an alternative payment plan. The main thing is to stay calm at all times. Typically, collectors are given small debts with significant non-payment of interest. When it comes to a really large amount, the credit institution is likely to go to court. If you would like assistance along the way, reach out to the financial experts at DebtQuest USA to figure out your options.