Dealing with Debt Collectors – the Rules of the Road

Dealing with Debt Collectors

Debt collectors exist for a purpose. To stay in business companies need to get paid for the goods and services they provide. They usually are. There are, however, a number of conditions that may result in companies not getting paid in a way that they consider fair and timely. These conditions include:

  • An unexpected change in the buyer’s financial condition such as loss of income or emergency expenses;
  • Buyer refusal to pay based on perceived failure of the seller to deliver purchased goods or services as represented to the buyer;
  • Weak personal financial management skills on the part of the buyer;
  • Fraudulent misrepresentation by the buyer of their ability or intent to pay for purchased goods or services.
  • Buyer misrepresentation of their identity (identity theft);

In many cases, especially those involving short-term changes in the buyer’s financial condition or disputes over product quality and timely delivery, buyers and sellers are able to quickly reach mutually agreeable dispute resolutions. When quick resolutions are not possible, companies may choose to avoid incurring additional costs associated with prolonged negotiations with the buyer. They may write off the amount of the uncollected debt against future earnings, or they may engage the services of a debt collection agency.

Types of Debt Collection Agencies

Debt collectors are organized in a number of different ways:

  • Some large companies establish a wholly owned subsidiary to handle their debt collection requirements;
  • Other companies establish contractual relations with a separate specialized debt collection company to which they assign delinquent accounts in exchange for a percentage of payments recovered;
  • Debt buyers provide selling companies with the option of “selling” the delinquent account for a percentage of the amount owed, with the buying company retaining all recovered payment amounts;
  • Some law firms specialize in providing debt collection services to selling companies. Usually working on a contingent fee basis, these specialty law firms may be employed after other collection approaches have failed. In some cases, however, selling companies may choose to start the collection efforts with specialized law firms, especially in cases where they believe successful payment recovery is unlikely without court intervention.


The Fair Debt Collection Practices Act

The U.S. Congress has recognized that debt collectors are a practical necessity in our economy. Congress also recognized that there needed to be a clear set of rules governing debt collection practices. Though both consumer groups and the credit industry have found cause to criticize the resulting Fair Debt Collection Practices Act, the Act is often regarded as one of the more comprehensible pieces of federal legislation.

The Act prohibits all debt collectors from conduct including:

  • Making collection calls between 9 PM and 8 AM;
  • Making collection calls after receipt of a written notice that the consumer refuses to pay the bill or has retained an attorney to represent them;
  • Making frequent or repeated collection calls with intent to discomfort any person at the called number;
  • Pursuing collection efforts after receipt of a timely written request for verification of the existence of a debt and the debt collectors legal right to attempt collection;
  • Calling the consumer at their place of employment – if such calls are prohibited by the employer;
  • A variety of additional forms of conduct aimed at embarrassing or intimidating the consumer.


The Act also specifies conduct that is required for all debt collectors including:

  • properly identifying themselves to the consumer;
  • providing the name and address of the original creditor;
  • notifying the consumer of their right to dispute the debt;
  • if requested, providing “verification of the debt” before continuing collection activities;
  • Limiting lawsuits to venues where the consumer currently lives or where the original contract was signed.


Of particular importance is the requirement that debt collectors provide written verification that a debt exists, that it was incurred by the consumer, and that the agency has a legal right to pursue debt collection activities. This provision of the act provides important consumer protection against being dunned for debts that have already been paid or otherwise resolved, or which were incurred by another party.

If You Are Contacted By A Debt Collector

Collection calls can be unsettling. How to best respond to collection calls depends on a number of factors. In almost all cases treating the caller with respect will elicit a respectful and constructive tone on the caller’s part. Here are some potential scenarios:

  • If you are contacted by a debt collector regarding an unpaid obligation that you know you incurred and that you intend to repay – if and when you can, your best option is to attempt to negotiate a workable repayment arrangement. Because of the way debt collectors are normally compensated, it is usually in the debt collector’s best interest to reach a truly workable arrangement as quickly as possible. Be sure to get the agreement in the form of a properly executed signed written document.
  • If the debt collector call is related to a debt you have already paid, or which you believe you did not incurred, immediately send a written “verification of the debt” request by certified mail with return receipt requested. Save copies of the letter and all future written correspondence with the collection agency;
  • If the call relates to a payment you refused to make because the goods or services the seller provided were unsatisfactory or not delivered on time, immediately send written notice via certified mail, return receipt requested that you have contested the payment obligation and requesting that the collection agency refrain from making future collection calls. As above, save copies of all written correspondence with the agency.
  • If you believe that a debt collector is behaving in a threatening or harassing manner, do not hesitate to file a written complaint with the Federal Trade Commission. You may also find useful advice on managing overly aggressive collection calls from peer to peer counseling groups that may be familiar with the business tactics of the specific collection agency you are dealing with.


If the above approaches do not lead to a satisfactory resolution, it may be advisable to retain a qualified lawyer to protect your interests. Lawyers specializing in debt collection issues are in good supply, and generally make themselves easy to locate. Obtain references before selecting an attorney.