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Tips for Dealing with Debt Collection Agencies

January 14th, 2009

dealing-with-collection-agencies.jpgDealing with debt collection agencies can bring stress to the most savvy of bill paying financial gurus. Standing your ground with collection agents can come from knowing your rights as a consumer and knowing how to play the game. Those consumers that owe money and know how collection agencies work may pay up to sixty percent less than those consumers who have not conducted proper research. Here are things that every consumer should know about debt collection agencies.

When you are contacted by a collection agency it is important to obtain valuable information including the proof and full amount of the debt with documentation from the original creditor. The truth is that many collection agencies aren’t even aware of the full amount of the debt. It is up to the debtor to ensure they are being charged the right amount.

Where do collection agencies obtain your debt from? Debt collection agencies pay from one to twelve cents per dollar for different types of debts from creditors. For debts that have not been charged off, the collection agency will pay up to twelve cents per dollar to the creditor to take ownership of the debt. For past due accounts that have recently been charged off the accounts are sold for seven to nine cents per dollar to debt collection agencies. For accounts that have been charged off debt collection companies can acquire the debt for as little as one cent per dollar!

The main reason that debt collection companies are able to negotiate the amount of debt which is repaid is the fact that they have paid so little for the debt. What does this mean for the consumer? Any amount which is repaid to the collection agency can be deemed profit, because of the low price that was given to purchase the debt from the original creditor. Negotiating with a creditor could lead to the consumer paying less than fifty percent of the original debt.

Collection agencies have the power to remove the debt from the credit report. When negotiating with a debt collection agency, this powerful tool is not often used to reclaim payment. Consumers need to realize the negative effect that a collection account has on the credit report. Negotiate the entire repayment, or partial repayment of the debt with a term of the strike being removed from the credit file. This can cause your credit score to improve greatly and is an essential tool in negotiating with a debt collection agency. Be sure to get the agreement in writing and put a time limit of up to thirty days for the conditions to take effect.

It is important to maintain careful watch of the credit report to ensure that older debts are not misrepresented by collection companies. Entries on the credit bureau’s reports can be disputed if the dates, terms, or amounts have been misfiled and are found to be inaccurate.


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