Tips for Dealing with Debt Collectors

Tactics you can use to your advantage when dealing with
Collection Agencies and Collection Attorneys

When dealing with debt collectors (collection agencies and collection attorneys) it is important to understand:

1. Their objective is to make money – They do business to make a profit and this dictates how they operate. 
    

2. They are paid based on how much they collect – i.e. - if $500.00 is collected they may earn $125.00 or 25%. 
   Note: 25% is an average commission; some earn more and some less.
    

3. They are usually overloaded with work – they can not devote the same resources to collect all the debts in their inventory.

Because of these factors debt collectors focus their resources where the rewards (profits, commissions) for their efforts will be greater. They work harder to collect debts that are larger and believed to be more collectible. This doesn’t mean that small debts or debts that for some reason are considered less collectible are ignored. They just don’t get as much attention - perhaps more computer generated form letters and fewer telephone calls.

There is an ongoing weeding out process. Bill collectors while working debts will repeatedly rate their collectability and whether it pays to continue their collection efforts or to give up and cut their losses. Thus, even if a debt had been given a high collection priority initially, developments in the collection process can change its status. This is done once again to concentrate resources where they can be most productive.

Some debts have shorter life spans. Small debts and debts with doubtful collectability are apt to have shorter life spans within a collection cycle. This means they will be charged off faster and placed in a passive collection mode by being inactivated and listed with a credit bureau. Some may eventually be sold to a debt collector or another business that goes after stale debts (seconds as they are referred to in the collection business). This is why a year or two later you may start receiving calls or letters on a very old debt. Different collection agencies have different procedures and some have separate departments that specialize in collecting small debts and debts where debtors can not be contacted (skips).

The debt collectors best case scenario:

1. A client (creditor) refers a debt to collect.

2. It’s entered into the collector’s system electronically directly by the creditor. 

3. A computer collection letter is automatically generated and goes out. 

4. A check for full payment is received in a few days by the collection agency.

This is where they clean up; they earn their fee with no cost incurred except for the postage on the letter. But, unfortunately from the debt collector’s point of view, this is seldom how it works. “Debts that collect themselves” – as we call them – are few and far between. Everything else that the debt collector has to do in their attempt to collect your debt reduces their profitability.

How this makes Debt Collectors Vulnerable

Understanding how debt collectors work in order to maximize what they earn provides substantial opportunities to frustrate them and to sabotage the process. If you attack the debt collector’s motivation to do business profitably and the individual bill collector’s drive to maximize his commissions, you will often be able to put yourself in a position to settle a debt and possibly, if you choose to, avoid payment altogether. To do this, certain characteristics of a debt can be exploited or manipulated as follows:

Size of a Debt
 

You should be able to settle small debts because they get less attention. Creditors will seldom file suit to try to collect them because the cost (time and money) to sue is not justified by the potential return. Therefore creditors and bill collectors will often be receptive to settling smaller debts, especially if there is a valid reason for seeking an adjustment. This is because without filing a lawsuit they have no real leverage to collect. All they can do is continue to dun for the money (which costs them money) and report the delinquency to a credit bureau.

You also have the option not to pay and to just ignore the collector. Eventually the dunning will stop and the creditor will charge the debt off. However, this is not a sensible move if you’re concerned about your credit because it’s likely that the charged off debt will show up on your credit report and reduce your credit score.

Don’t panic if the debt is sent to an attorney. They attempt to collect small debts with no intention of filing a lawsuit. It’s effective because they rely on your assumption that a suit will be filed if you don’t pay. The attorney’s intentions are often revealed by the content of their collection letters; if they threaten a lawsuit, chances are that one will be filed because if not they have violated federal law by making an idle threat (see Norm’s Free Tip #6 About Your Rights).

Caution – Size can speed up credit reporting. If you’re concerned about your credit be especially careful when dealing with small debts because they are apt to be listed with credit bureaus faster. 
 

Other characteristics of debts you can use to you advantage:

You can exploit or manipulate other characteristics of a debt to create opportunities to settle or to avoid payment altogether as follows:

Validity - Is it real or bogus? If you raise a dispute as to the legitimacy of a debt it will frustrate collection efforts. This of course works best if the dispute is a legitimate one.

Collectability – Can the debt be collected? If you create the impression that your debt is not collectable you can also frustrate the debt collector’s efforts and reduce his motivation to vigorously pursue collection. This is done by making yourself unreachable or by persuading the debt collector that you don’t have the ability to pay.

Other tactics to reduce a collector's motivation:

Asserting your rights – If your rights are violated by a debt collector (which they often do - see Norm’s Free Tip #6 About Your Rights) you can cause them substantial difficulty and expense. And, you can use the violation as leverage to get them to compromise or to back off.

Going on the offensive – Creditors and debt collectors often seek to avoid confrontation that can result from hard-core collection tactics. Thus, simply raising a dispute or using certain counter-attack strategies may soften their position and even get them to back off.

Using “dirty tricks” – These are tactics you can use that are difficult for bill collectors to deal with; they frustrate collection efforts and can cause cases to be neglected or put aside.

More about Dealing with Debt Collectors

A substantial portion of my book HOW TO SETTLE YOUR DEBTS goes into much greater detail about using the methods and tactics outlined above. It also provides a great deal of information about your rights regarding debt collectors and how you can create opportunities to favorably resolve debt collection situations. Below is an excerpt from the book’s Table of Contents regarding this material:

Part III - Confessions Of A Bill Collector

Chapter 6  - Vulnerabilities of Debt Collectors

The factors that motivate bill collectors and leave them vulnerable to attack

Chapter 7  - Challenging the Validity of a Debt

How to create doubt as to whether you owe the money

Chapter 8  - Creating Doubt as To Collectability

How to make them believe that they can’t collect what you owe

Chapter 9  - Counter-Attack and Use “Dirty Tricks”

How to put creditors and bill collectors on the defensive and use tactics that frustrate and discourage them

Part V - Debtor’s Rights

Chapter 12 - The Fair Debt Collection Practices Act (FDCPA)

What this law regulates, whom it regulates and whom it protects

Chapter 13 - Enforcement of the FDCPA

How to take action and obtain compensation from bill collectors who violate your rights

Part VII - Dealing With Your Debts

Chapter 20 - Dealing with Attorneys, Lawsuits and Judgments

How you can favorably resolve debts that have been put into legal processing.

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