Options When Credit Card Debt Is Sold to a Collection Agency

by Craig Berman
Tossing notices from collection agencies aside only postponses the inevitable.

If your credit card company sells your debt to a collection agency, it cuts off one avenue of negotiation. In most cases, you can’t call the credit card issuer requesting a settlement at this point – your debt is now owned by the agency, which has no interest in building a long-term relationship with you like a credit card company might. You still have some options to settle the matter, though, depending on the status of the debt.

Confirm Debt's Legitimacy

You don’t have to take the collection agency’s word that you owe the money it says you do. Agencies are legally required to send you verification of the debt, and obligations cease to be collectible after the statute of limitations has run out. Upon request, collection agencies must tell you, in writing, the name of the creditor and what to do if you want to dispute the debt. Ask for this verification within 30 days of getting the initial notice from the agency to protect your rights. If the debt is in error and you have documentation of that fact – for example, if the bill concerns a service you had previously cancelled and you have written record of the cancellation – include copies in your response.

Dictate Contact Terms

Some collection agencies try to get you to pay them by constantly calling your house at all hours, but you have the option of putting a stop to that if you want. Send a certified letter to the agency, return receipt requested, telling it you don’t want to be contacted again and are exercising your rights under the Fair Debt Collection Practices Act. Once it receives that, it can no longer contact you except to tell you it no longer plans to contact you, or to let you know it plans on taking a specific action, such as if it intends to file a lawsuit to seek redress in court. This doesn’t make the debt go away, however -– it just means you won’t have to hear about it as often.

Pay the Bill

The easiest way to make a collection agency go away is to pay the bill. It’s preferable not to give agencies direct access to your bank account, such as check by phone, to avoid unwanted withdrawals later. Online bill pay or a certified check provides a record of the transaction while providing greater protection for your personal information. If you don’t have the cash to pay the whole amount right away, you sometimes can forestall a lawsuit by agreeing to a payment plan. Make sure the agency agrees to the terms in writing -- in particular that it agrees not to take legal action while this plan is in effect.

Negotiate a Settlement

Collection agencies buy debt for pennies on the dollar, so there’s room for them to make a profit even with a settlement. Contact the agency and make an offer to settle the debt for less than the original demand. In particular, get the agency to waive any fees or other charges it has tacked onto the original balance. While you’re unlikely to settle the account for a token amount, a lump-sum payment that covers a big chunk of the amount at issue can provide the agency with a profit while avoiding the risks and expenses of a lawsuit.

Fight a Lawsuit

If the collection agency does file suit, don’t ignore it. If you don’t mount a defense, the agency will win a judgment against you, even for a case that would otherwise be decided in your favor – for example, if the debt has passed the statute of limitations deadline for collection. Simply filing a short response with the court denying liability increases the agency’s workload enough that a settlement becomes more attractive. You can challenge its standing to collect, its proof that you owe the debt and the statute of limitations. If the agency has violated the Fair Debt Collection Practices Act, such as by calling before 8 a.m. or after 9 p.m., calling your friends and family or harassing you at work, mention that in your response or in a countersuit. Bringing in a lawyer specializing in debt cases can help you secure a better settlement and perhaps convince the agency to back down.

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