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Collections I

Dealing With Collection Agencies

In General

As the Economy slows more companies are becoming more aggressive in their collection efforts.

While this can be frustrating to consumers, it is probably a good thing.


First it can make you aware of billing errors or other problems that are not your fault that need to be corrected quickly. Failure to resolve a problem in a timely manner may result in inability to fix the problem later.

Second it can make you aware of problems in your budget that should not be ignored, but should be immediately dealt with. Ignoring a problem only makes it worse.

If you see water running through a small break in a dike, you quickly fill the gap. If you don't you will soon have a large break with so much water pressure coming through that it can't be fixed.

Or, if you were in a boat and it sprang a leak, you would want to plug it while it was small. You wouldn't wait until the boat were full of water to do something.

The First Rule of Collections - Be Firm but Pleasant

Many collectors are not pleasant to deal with.


Guilt if you owe the money and can't pay.

The squeaky wheel gets the grease.

Many don't get paid unless they collect.

Some have a chip on their shoulder, it's hard to collect bills and be yelled at all day long

If you make an effort to be pleasant

The collecting agent is more likely to be pleasant

The collecting agent is more likely to be helpful

If despite your best efforts, they

They make threats of any kind or

They use profane or abusive language

You should indicate that you consider their speech "abusive collection conduct" and that you are not required to endure it.

Further, that you will hang up if it continues and that you will file a complaint against them.

At the least you should file a detailed police report

You also may have certain legal remedies under the "Fair Debt Collection Act" that we will cover in a separate program.

The Second Rule of Collections - Gather Information

Name, address and phone number of collecting company.

(So you know where to direct payments or correspondence.)

If possible the name of the person calling.

(So you know who you were talking to and can call them back.)

Who they are collecting for.

What they have been told regarding the nature of the Debt.

The Amount of the Debt.

The Account number with the collecting company.

The Third Rule of Collections - Do Not Promise What you Can't Deliver.

It is tempting to make promises to get this person off your back.

Be brutally honest about your ability to pay.

Offer only what you can really do.

Your credibility is at risk in future contacts with this person or company.

The Fourth Rule of Collections - Verify Information

You should call the original Creditor and ask what the status of the Account is.

If the debt has not been sent to collections -

Let them know who is attempting to collect their bills

Then contact the Collecting Agent and let them know

If the debt has been sent to collections -

Write to the Collecting Agent and ask for the "Assignment of Claim" giving them legal authority to collect the debt.

You will want a copy of this document for your files.

You want to ensure that the Collection Agent has authority to collect the bill.

If you pay the Collection Company and it turns out they don't have authority to collect, you may have to pay the bill twice.

The Fifth Rule of Collections - Keep Good Records.

Make a record of each conversation you have with a Collection Agency.

Note all agreements and promises made and deadlines for performance.

Include any identifying details such as names, dates, and times.

This is called a "contemporaneous record" and it is good evidence if you ever must go to court.

Try to get the Collecting Agent to verify any agreements with you in Writing.

Verbal agreements are usually not binding. This is a topic we will come back to in detail at another time.

Assuming that they are can get you in big trouble.

If they will not confirm in writing, you should

Send a letter confirming your agreement and include your payment

Indicate in the letter that cashing your check is acceptance of the agreement. In the law this is called "an accord and satisfaction".

It may be wise to note something on the check itself.

Then keep a copy of everything.

If there is a valid disagreement between the parties as to the nature and/or amount of a debt, they can reach an agreement to settle the dispute which will be enforceable if noted in writing and payment on the new agreement is accepted. If there is not true disagreement an accord and satisfaction is not enforceable in court. Nonetheless it is a good technique to use as a "moral argument" that the Collecting Agent should keep his or her word.

Finally, there is nothing wrong with recording the conversations. Recordings make great evidence in Court or with the Police. As long as one side to a conversation consents you may record it.

The Sixth Rule of Collections - Don't give Electronic or Post Dated Checks

Many people are under the misconception that post-dated checks cannot be cashed.

A check is negotiable the moment it is written.

As a general rule Electronic Checks are not a good idea

First, you have no way of knowing if the person on the other end of the line is legitimate. They could be a con-artist.

Second, you have no way of ensuring that the amount you authorize will be the amount removed from your account.

Third, you can't reverse an electronic check. The money is already gone. There may be some cases where fraud is involved and the back will be kind enough to reverse things, however, that takes time, effort and often money.

Fourth, you cannot ensure that they will not take money out of your account electronically in the future. You are much better off to send a check by over night mail, even if it is more expensive.

The Seventh Rule of Collections - Refuse to Be Intimidated

Many Collectors will use intimidation or false statements to get you to pay.

They may make threats that are inaccurate

For example:

If you don't pay I'll immediately garnish your wages.

(Must have a judgement against you first.)

[We'll talk about the collection process in another program.]

If you don't pay I'll immediately garnish your bank account.

(Same problem, must have judgement first.)

Worst was little old lady who was told the collector would come out to the house and take her food out of the fridge.

(Several problems here. First, must have judgement first. Second, under Utah Law you are entitled to keep property that is designated as exempt. This includes a years supply of food. Third, had the collector done what he threatened, he would have been guilty of the criminal offenses of trespass and theft.)

They may create fictitious deadlines.

For Example:

Pay by this deadline or else will send to the Attorney, File with Court, etc.

If the collector is out of state or this is the first call, it is probably not true.

(An attorney must be hired, documents sent, and papers prepared before anything else can take place.)

Pay by this deadline or the debt will be higher.

If they are making a settlement offer, this may be true, however, often it is not. A few days usually will not make a difference. Especially on a first contact. I have had creditors make discounted offers for months.

Remember if it is a settlement to get it in writing before giving them any money, otherwise you may find that your settlement never existed.

If they say the debt will be higher, they may be lying. First, the debt can increase only according to the terms of your contract or state law. A few days will generally not dramatically increase a debt. However, debt can increase as a result of the collection process. [We will spend a separate program discussing this problem.]