How Does Consumer Debt Collection Work?

Have you ever been contacted by a Debt Collector and wondered why they are calling you and how in the world they got your number?  In this post, I will attempt to explain the Consumer Debt Collection process and what to expect when they start contacting you.

The Beginning of Consumer Debt Collection

The consumer debt buying industry began in the early 1990's when the US government started selling off assets from savings and loan banks that had failed.

As consumer debt has grown exponentially over the past decade, the number of debt collection firms has skyrocketed as well, growing from about a dozen firms in 1996 to several hundred today.

The big credit card companies are not able to devote the enormous amount of time and money into pursuing the thousands of people who fall into debt each year, and debt collection companies are eagerly stepping in to buy the debt from creditors for a fraction of the total debt.

Last year debt buyers paid an average of 5.4 cents for every dollar of unpaid debt they bought. Debt collection is a very lucrative business. (CHA-CHING!)

The Federal Trade Commission (FTC), which monitors the complaints lodged by consumers against debt collectors, regularly receives more consumer complaints about debt collectors than any other industry. However, the number of complaints has quadrupled in the past five years.

How Consumer Debt Collection Works!

The typical debt collection company will purchase your debt from the original creditor who is essentially trying to cut its losses.

The debt collector will then attempt to recoup any, if not all, of the original debt. The worst part is not that the debt collectors are trying to collect on an old debt, but instead, it is the Fraudulent Debt Collection practices they use.

Some particularly nasty debt collection companies are resorting to illegal practices -- verbal abuse, harassment, and even threats of violence and lawsuits -- in an attempt to squeeze money from consumers for the debts the company has purchased.

In fact, many times the debt collection company isn't even bothering to harass and abuse the right consumer.

For example, the Washington Post reported that a New Hampshire man was repeatedly called by a debt collector about a loan his daughter owed even though the daughter had moved out 15 years earlier. The debt collector reportedly called this man six times in 15 minutes!

On the last call, the debt collector told the man his Social Security number, his wife's name, and threatened to send thugs.

Another particularly troubling recent practice is the growing number of cases where debt collectors persuade consumers to pay just a little of the amount due, and then they use the bank info to improperly withdraw more money from the consumer's bank account.

Know Your Rights!

The FTC enforces the Fair Debt Collection Practices Act, which outlines consumer rights and prohibits debt collectors from engaging in unfair, deceptive, and abusive practices.

The key to protecting yourself, and your sanity, is to KNOW YOUR RIGHTS!

how does consumer debt collection work


Tags: consumer debt collection, common collection practices, what can a debt collector do

Dirty Tricks of Debt Collection: How to avoid Debt Collector Tricks

debt collector tricksAll too often, individuals who are struggling with their debt fall victim to debt collector tricks and scams—all because they aren't aware of the laws that exist to protect them.  The Fair Debt Collection Practices Act (FDCPA) was enacted to protect people from the unfair, deceptive and abusive tactics that many companies were using in their attempt to collect outstanding debts.  Under this law, you have specific rights that protect you from the worst debt collector tricks.

Think about your last interaction with a debt collector.  Did any of the following occur?

  • Calls made before 8:00 a.m. or after 9:00 p.m.
  • Calls made to your workplace
  • Calls made so frequently as to become an annoyance  
  • Use of abusive or obscene language
  • Threats of bodily harm or pending arrest
  • False statements made regarding the amount of your debt
  • Misrepresentation on the part of the debt collector (for example, pretending to be an attorney or the police)
  • Contact made only by postcard (vs. a phone call or letter)
  • Attempt to collect interest or another fee that is not a part of the original contract for the debt
  • Contact made to you rather than the attorney who is representing you in the matter

debt collector tricksWhile we've listed some of the most frequently occurring abuses here, that doesn't mean there aren't other practices that are illegal.  The most important thing that you can do to avoid these and other issues is to educate yourself on your rights under the law. The Federal Trade Commission's website offers a detailed summary of FDCPA and is a great place to get started.  

Keep in mind that most states also have their own version of the Fair Debt Collection Practices Act.  You can contact your state's Attorney General office ( to learn more or to report a violation by a particular debt collection firm.  The Federal Trade Commission (, which enforces the FDCPA, has extensive information about consumer rights in general, as well as an online complaint form.

If you feel that you've been the victim of unfair practices or debt collector tricks, take the time to research your rights. Then, take action to protect yourself. 


photo by: stevendepolo

Tags: fair debt collection practices act, common collection practices, debt collector tricks

Don't make these MISTAKES dealing with collectors!

STOP! Don't make these mistakes dealing with collectors!  

Dealing with debt collectors rarely is a pleasant activity. They call you up at all hours of the night, send you nasty letters and make your life a living nightmare. Bad as it may seem, you can only make it worse by making one or more of these mistakes:

mistakes dealing with collectors


1. Lying: If you lie and you're caught in the lie, you can be sued.

2. Paying without receiving a confirmation letter: If you pay the debt, make sure you get confirmation that the account is closed. Also, check your credit report two months later to see that the line on your credit report shows "closed" or "settled" or "paid as agreed."

3. Failing to dispute a charge in a timely matter: If you believe you have been wronged, you must file the proper claim as soon as possible. The statute of limitations is very specific depending on your state; if you wait too long, you could lose your legal right to dispute the claim.

4. Ignoring the situation: If the collection agency has a legitimate claim against you, especially if it knows you have a job, things can only get worse, not better. Talk to an experienced Solutions Specialist to start investigating your options.

5. Bouncing checks: This will get your case sent immediately to the creditor's legal department.

6. Becoming intimidated: In the words of Eleanor Roosevelt, "No one can make you feel inferior without your consent." Don't let the collection person bully you around. The FDCPA states very clearly what a debt collector can and cannot do.

7. Letting the creditor or collector deduct money directly from your bank account: Never give the creditor your checking account number.

8. Making promises you cannot keep: Sometimes you will be tempted to just say, "The check is in the mail." But when the check doesn't arrive, they'll call even more frequently. They may even try to sue you for lying.

9. Avoiding the calls: They will only occur more frequently. You can stop the calls by taking a few simple steps.  

 mistakes dealing with collectors


photo by: Qfamily

Tags: debt collectors, common collection practices, mistakes dealing with collectors

Common Collection Practices of Collectors

If you are delinquent on paying your credit cards, you no doubt have learned how ruthless collectors can be.

Is there anything you can do about it?stop collection calls


The Fair Debt Collection Practices Act (FDCPA) was created to supposedly protect consumers from the actions of collectors.

According to the FDCPA:

  • A collector may contact you in person (rare), by phone, mail, fax, or email (rare). 
  • They are not to call before 8 am or after 9 pm. 
  • They may contact someone else (friend, family member, neighbor), but again, according to the FDCPA, only to find out where you live, what your phone number is, or where you work.  They are prohibited from telling anyone else that you own money, but the phone call speaks for itself.
  • They are not to call you at work, but we know they do.
  • They are not to harass you by calling many times a day, over and over.  But, they do so by using a computer dialer, which although is annoying, is not illegal as they have a “business” relationship with you.

Do they, the collectors, abide by the FDCPA?  Rarely.

If you feel your rights have been violated, you can:

  • Report your problem to your state Attorney General’s office ( and the Federal Trade Commission ( 
  • You have a right to sue a collector in a state or federal court within one year from the date you believe the law was violated.  Although this may be a lengthy and costly option, if you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages, employment or medical bills.  It may be in your best interest to seek the advice of an attorney if you decide to sue the collector.

One of the best things you can do to put an end to the harassment of collectors is to send them a cease and desist calling letter.


If you would like more information about the FDCPA, click here.


Tags: fair debt collection practices act, creditor legally call my neighbor, common collection practices, stopping debt collection calls

HELP! Can a debt collector leagally call my neighbor?

It is one thing to "love thy neighbor", but it is quite another thing to share financial information with the folks next door.  However, we get calls from people all the time looking for help because their creditors have started calling their neighbors, parents, siblings etcetera. 

Can a debt collector legally call your neighbors?

Surprisinglygly, yes.  In some cases this practice is actually legal.  This is just another example of how collectors are getting more resourceful as more and more consumers become buried in debt. 

Federal law regulates only third-party bill collectors.  Calls to someone other than the debtor, such as a neighbor or family member, are allowed as long as collectors only verify the debtor's address, phone number or place of employment. 

debt collector leagally call my neighbor

What CAN'T debt collectors do?

Debt collection laws vary from state to state, but here are the basic rules that all collectors must follow.  These laws prohibit debt collectors from:

  • Calling outside the hours of 8am and 9pm, threatening violence or using profane language
  • Refusing to identify themselves, misrepresenting what is owed or falsely implying legal action has been taken
  • Contacting debtors at work if it is possible to reach them at home in the evening
  • calling more than once weekly at work or continuing to call the workplace if the debtor has told them not to

Are you being harrased by collection calls. If so, you may need the services of a professional debt relief agency.  Their solutions specialist can help you to determine whether you would benefit from a Debt Consolidation or Debt Settlement program.   

If you need help immediately, CALL NOW for assistance!


Tags: fair debt collection practices act, debt collection harassment, creditor legally call my neighbor, common collection practices, debt relief solutions, credit counseling

What Can I Do to Prevent a Wage Garnishment?

help stop wage garnismentA collector threatens you with a possible wage garnishment.

What can you do?

Let's say you receive a call from a collector, and he says that unless you send money right away, then they will start the litigation process to sue you.  A little scary, right?

Of course, that's why they do it! Their job is to collect money from you, and they will use most any tactic possible, especially intimidation.

I won't get into what the collector, legally can and cannot do in this article. You can read more about that in previous posts. Let's focus on what you can do to prevent this.

For more information, visit the FDCPA Guide for Consumers.

Tell the agent you need a couple of days to raise the cash (even if there is "no-way") and get a phone number to call back.  This will stall them from moving forward.

By the way, don't be surprised if they tell you they can't wait and that they need a down payment right now using check-by-phone or else they will start the litigation process.

Again... this is their way of trying to INTIMIDATE you.

Get their phone number and hang up the phone!

I am going to assume you do not have a large sum of cash to make a lump sum offer to settle.  (If you had a large sum, you probably wouldn't be in this situation!) It is very important that you know how much money you can afford each month before you make a repayment offer. 

Take the time to complete a detailed Budget so you can know exactly how much is coming in and how much is going out each month.

The goal is to arrange a settlement for less than the full amount paid out monthly with payments you can afford.  You may not get a huge reduction (maybe down to 75%-80%), but its worth asking.

Once an agreement has been negotiated, make sure you get the agreement in writing...PERIOD!  No written agreement...No deal! If you cannot get the agent to agree, ask for the supervisor.  You may not have any better luck, but it's worth a try.

Most creditors would much rather agree to a settlement repayment plan rather than being forced to go through the litigation proccess.

  • DON'T be intimidated
  • Know what you CAN afford to pay monthly
  • Get the agreement IN WRITING
  • Prevent any judgment/litigation

Hope this helps!

Prevent Wage Garnishment


 Photo by Caston Corporate

Tags: fair debt collection practices act, debt collection harassment, wage garnishment, common collection practices, stipulated agreements

What is Fair Debt Collection?

I've been getting abusive calls from collectors and want to know: "What are the rules of Fair Debt Collection?"

The Federal Trade Commission (FTC), is the nation's consumer watchdog and enforces the Fair Debt Collection Practices Act (FDCPA). The FDCPA covers almost all debts, but doesn't cover debts incurred to run a business.

Can a collector contact me any time or place about my debts?

NO!  A collector my not contact you before 8am or after 9pm.  They may not contact you at work if they are told (verbally or in writing) that you're not allowed to get calls at your job.

I have told them to stop calling me both at work and home, but they ignore me. Is there anything I can do?

YES!  The FDCPA states that after consumer has requested the collector to stop calling, in writing, the collector must stop or be in violation.

How do I do that?

You need to write a letter and mail it by certified mail. To learn exactly how to do this, click below:

 Fair Debt Collection

Can a collector contact anyone else about my debts?

A collector may only contact other people to find out your address, phone number and where you work, and they may only do that once!  They are not permitted to discuss your debt!

A collector was abusive and told me that if I didn't send them so much money by the end of the month I could go to jail!

First, no one goes to jail over an unpaid, unsecured debt! PERIOD! That type of language is not typical of collectors, but it does happens from time-to-time.

The FDCPA states that a collector MAY NOT:

  • harass, opress, or abuse you or any third parties they contact.
  • use threats of violence or harm.
  • use obscene or profane language or
  • Use the phone repeatedly (calling 10 times/day!) to annoy you
  • falsely claim they are attorneys if they are not
  • claim that you have committed a crime
  • say that you could be or will be arrested if you don't pay
  • say that they will seize, garnish, attache or sell your home or property if such action is prohibited by law (99% of the time it is!)
  • send you anything like an official document from a court or government agency if it isn'ta government agency.



Tags: fair debt collection practices act, wage garnishment, ftc, how to stop collection calls, common collection practices

Are Stipulated Agreements a good deal?

If a judgment has been entered against you for a delinquent, unsecured debt, you may be offered a stipulated agreement.

What should I do?

Are Stiplated Agreements a good deal?

It depends.  When you signed up for your credit card or took out an unsecurred loan, you agreed to the terms and will be held accountable if you don't pay.

Most creditors will try several tactics to get you to repay what you owe, but if unsuccessful, they may decide to file a complaint in your local county court.

You'll receive a summons and since you owe the money, there is really no reason to answer (respond) or appear to explain yourself.

The creditor (the plaintiff) will be awarded a default judgment in the future if you do not arrange a plan to repay the debt you owe.

With the judgment in the creditor's favor, they can now seek:

  • to garnish your wages or
  • levy your bank account

But before they do, they would most likely agree to a stipulated agreement, whereby you agree to repay all or a portion of the debt owed.

Each state has a maximum interest rate that can be charged during a stipulated agreement.  In many cases you should be able to negotiate a 0% rate.

A Stipulated Agreement is not a bad deal if:

  • you currently receive W-2 income from your employer or
  • if you usually keep a substantial amount of fund in your bank account

In a wage garnishment, an employer would be forced to deduct an average of 25% of your net take home pay each pay period!

For most people, this would prevent them from paying the important bills like the mortgage or rent, food, utilities, etc.

So, by accepting a stipulated agreement for a lot less than the wage garnishment would be might be in your best interest.


  • If you are retired and receiving a pension or Social Security, these funds are exempt from garnishment.
  • If you are receiving unemloyment income, these funds are exempt.
  • If you are disabled and receiving Disability Income, these funds are exempt.
  • If you are self-employed, it is very difficult for a wage garnishment to be enforced as most self-employed people take a very small "income" and in most states, this would be exempt from wage garnishment.

In those cases, you would NOT agree to a stipulated agreement but should negotiate a settlement, usually a a substantially reduced amount.

Before accepting a stipulated agreement, you should seek the advice of a debt management or debt settlement specialist.

In most cases, a settlement agreement can be negotiated before the creditor decides to seek legal action.

A stipulated agreement should only be considered if all other options have been exhausted.


Tags: debt relief programs, common collection practices, stipulated agreements, debt consolidation vs. debt settlement

Hardship Plans...BE CAREFUL !

I'm in trouble!

You are late or behind on your credit card payments.  The agent calls and tells you about Hardship Plans.  Is this a good deal?

Never forget that the goal of the credit card industry is to make money...lots of money!

They don't care...                    

  • about you
  • your family
  • if you lost your job
  • have had major illness

So when they offer a hardship plan, remember the saying,

If it sounds too good to be true, it probably is.

A typical hardship plan will waive or reduce interest rates and fees fo 6 months or so.  The pitch is that this will give you a little breathing room and you can renegotiate your payments or plan later.

  • They will want you to set up automatic deductions from your bank account or send them 6 months of post dated checks.  Doesn't sound too secure, does it?

OK, so maybe you agree.  Let's examine the plan.

  • Your balance is $5000. 
  • You current minimum monthly payment is $150 or so. 
  • They offer you payments of $100/month for 6 months at a reduced rate of 6% and no fees.

After six months:

  • you've paid $600
  • $144 went to interest 
  • $456 went to reducing the principle 
  • your balance is $45444

Now it is time to renogiate your plan.  More often than not, you'll be back to high interest rates and fees which means it will take you several years and thousands of dollars in interest to pay off your card.

Some plan!

Tags: best way to eliminate credit card debt, common collection practices, debt relief solutions, hardship plans

How to Stop Collection Calls

How to Stop Collection Callshow to stop collection calls

You've just sat down to dinner and the phone rings.  Another collection call. In fact, this may be the 10th time they have called today! Is there anything you can do about it? YES!

If a collector calls you about a debt, you need to talk to them at least once to see if you can resolve the matter. But be aware...

Collectors are professionals who have been trained with techniques to get you to send them money...PERIOD! They don't care about your circumstances or feel sorry about your problems, so don't wast time trying to explain.

If you cannot resolve the problem by phone (and most of the time you can't), then how can you get them to stop calling?

You will need to get the address of the collector in order to write a letter.  Asking the collector who called for this information usually is a waste of time as the collector knows that you are most likely going to send a request to stop calling you and they do not want you to do that.  Most collectors are paid by commission in relation to the amount of debt they can collect.

You should have received a statement or letter that will have the address of the collector. If not, you should receive one soon.  In the meantime, do not talk with them.  You may want to screen your calls using caller ID or simply turn off your ringer.  You can always listen to your messages later.

Once you have the address of the collector:

  • Write a simple letter stating that you don't want the collector to contact you again. Be sure to include your name and account number.
  • Make a copy of the letter for your records.  Send the signed orriginal letter by certified mail and make sure to pay for the "return receipt" so that you can document and prove that the collector received your request.
  • When the collector receives the letter,they may only contact you once more. They will either call you to tell you that they received the letter and will not callyou again or to let you know how they intend to pursue collection of the debt in the future.

Tags: debt collection, credit card debt, how to stop collection calls, common collection practices