If you’ve ever had to deal with debt collectors, you know that many of them can be extremely persistent, rude and even downright obnoxious. But how do you know if a debt collector is flat-out lying to you or misrepresenting the facts just to get you to fork over some cash? It’s not always easy to separate truth from fiction when it comes to aggressive bill collectors.
Debt collection agencies train their collectors do everything possible to collect a debt and close out an account as rapidly as possible. Sometimes, unfortunately, the unscrupulous ones will even tell you bald-faced lies in an effort to scare you or quickly squeeze money from your wallet.
Debt collectors are typically well-trained individuals who deal with hundreds of cash-strapped consumers every single month. Consequently, they know what questions to ask, how to intimidate you, and what buttons to push, in order to get what they want.
In light of these facts, it’s important to be aware of the tactics debt collectors often use, including the lies that many are trained to tell.
Here is a look at some of the most common lies bill collectors will tell you:
Lie #1: “Paying off your debt immediately will improve your credit rating.â€
The Truth: Negative references such as “was in collectionsâ€ or “was 90 days past dueâ€ will still stay on your credit report, even after you pay off an account in collections. Under the Fair Credit Reporting Act, negative information such as late payments generally remain on your credit files for seven years from the date of the last payment. So paying off your debt after being prompted by a bill collector will not automatically have a positive effect on your credit rating.
The exception to this rule: You may be able to boost your credit rating if you get an agreement in writing upfront from the creditor or debt collector that they will remove all negative information from your credit reports. Sadly, most consumers don’t negotiate for this when dealing with debt collectors. And once you’ve paid what you owe, you’ve lost a lot of leverage to get the debt collector to delete negative information from our credit files.
Lie #2: “If you just send me a post-dated check, this issue will quickly go away.â€
The Truth: Any “agreementsâ€ you’ve made over the phone where the debt collector says he or she will accept a post-dated check rarely work out in your favor. You just don’t know what’s going to happen with that check, and you’re also revealing your bank information and address by sending them the check.
Debt collectors have been known to cash post-dated checks earlier than agreed to, to change the amount of a payment on a check, and to later tap into people’s bank accounts once the bill collector has someone’s account information. So don’t agree to forward any post-dated checks. Send payments using a money order or certified check, return receipt requested — not via your personal checking account.
Lie #3: “Maybe I can help you explain your situation to a family member or friend who can loan you the money?â€
The Truth: Debt collectors who use this tactic are not trying to “help you out.â€ Rather, they’re arming themselves with very personal information. They’re trying to find out your closest relatives and friends in case they ever need to contact these people to track you down.
Additionally, by asking questions like: “Don’t you have a relative who can loan you the money?â€ debt collectors are trying to pressure you into paying money you simply don’t have.
Refuse to engage in this type of dialogue altogether and simply state: “I’ve exhausted all my resources and have no other available funds from any sources whatsoever.â€ Avoid revealing any details about your current financial situation. Don’t answer questions about where your bank accounts are, how much you have in the bank, whether or not you’re working, or how much you earn.
Lie #4: “If you don’t pay immediately, we’re going to take you to court or garnish your wages.â€
The Truth: Under the Fair Debt Collection Practices Act, bill collectors can’t legally threaten to take you to court if they have no intention of doing so. They also can’t haphazardly garnish your wages. Wage garnishment only comes about by a structured legal process.
If a debt collector does pursue a court judgment against you, you will be given notice about the court date and will have the opportunity to present your side to a judge. So if you dispute a debt, or simply don’t have the cash to pay, don’t get overly worked up by legal threats. In many cases, these are empty threats and pure posturing on the part of debt collectors.
Lie #5: “I don’t have to prove anything. I’m calling because you owe a debt — and you know it!â€
The Truth: If a debt collector calls you out of the blue claiming you owe a debt and you’re not certain that you do, you should dispute it within 30 days and ask them to validate the debt.
Under Section 809 of the Fair Debt Collection Practices Act, you have the right to send a bill collector a “debt validationâ€ letter requesting more information about the debt you are being told is still outstanding. This is essentially a dispute letter that prompts the bill collector to send you proof of debt in the form of a complete payment history, a copy of the initial loan agreement or credit card application, and proof that the company contacting you actually owns the debt or has been assigned the debt.
While many bill collectors will send this information out to you within five days of receiving your letter, some may send you inadequate or incorrect information. Others will flat out disregard the law and fail to provide proof of the debt. If a debt collector tells you “I don’t have to prove anything!â€ simply hang up on him and cease all contact with that individual.
According to the Federal Trade Commission, any creditor who can’t validate a debt:
- Is not allowed to collect the debt,
- Is not legally permitted to contact you about the debt, and
- Is not allowed to report it to the credit bureaus. Doing so is a violation of the Fair Credit Reporting Act and gives you the right to sue for $1,000 in damages for each violation of the Act.
Lie #6: “We’re going to embarrass you by letting your family members, friends and even your employer know about your unpaid debt.â€
The Truth: Again, the Fair Debt Collection Practices Act provides you with 10 different rights in order to protect consumers. One of them is the right to be free from harassment, intimidation and embarrassment by debt collectors. So debt collectors do not have the right to spread your personal business publicly, or share information about your debts with family and friends or your employer. If they do, report them immediately to the FTC and the Better Business Bureau.
Lynnette Khalfani-Cox is a weekly money and finance columnist for BlackEnterprise.com and founder of the free financial advice blog, AskTheMoneyCoach.com. Follow her on Twitter @themoneycoach and see her column every Tuesday on BlackEnterprise.com.