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Explore the latest happenings at Kirtland FCU and learn about important topics from around the financial world. Here’s your insight!
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The Dos and Don’ts of Debt Collection

07/27/2020
Ashleigh, K-Staff

If you’re in debt and have been contacted by your lender or even by third-party debt collection agencies, there are two things to keep in mind. First, you aren’t alone. A 2018 study by the Consumer Financial Protection Bureau found that roughly 28% of those with a credit history have a debt reported by a third-party debt collection. At least nine percent had at least a 60-day delinquency on a credit card. The second thing to keep in mind is that you have options.
 
The COVID-19 pandemic has resulted in an upheaval in the economy unlike any event in recent history, with millions of Americans unemployed and struggling. Despite government attempts to help, many families are facing unexpected economic pressure.
 
If you’re at risk of falling behind on payments:
 

DON’T

Wait until you’ve missed payments to fix the problem.
 

DO

Contact your lenders if you’re at risk of missing payments. If you’re having trouble finding the money to make this month’s mortgage, credit card, auto, student loan, or other debt payment, contact your lender right away. They may help, but your options will be limited if you wait to be contacted or call your creditors after the fact.
 
Many lenders have “accommodations”—hardship programs that can delay or adjust some payments. And if you’re enrolled before you fall behind on your payments, you may be able to avoid negatively impacting your credit score. Be sure to ask for details of any such program before enrolling. Will it affect how much you pay overall? Will your credit limits be impacted? Will your credit score take a hit? And what are your options when the program is over if you’re still facing financial trouble. Be proactive!
 

DON’T

Be intimidated by a debt collection call.
 

DO

Verify your debts and know your rights.  There are rules governing how a third-party collector can approach you to collect a debt. These collectors can help you identify a realistic repayment plan. The Fair Debt Collection Practices Act (FDCPA) says that a debt collector is not allowed to use unfair practices to collect a debt. They may not
 
  • Try to collect charges in addition to the debt unless they are allowed by the contract or state law
  • Deposit a post-dated check early
  • Communicate with you about a debt by postcard
  • Use any language or symbol on an envelope for correspondence with you (other than its address) that indicates it is a debt collector
  • Misrepresent the debt, including the amount owed.
  • Claim to be an attorney
  • Make threats to have your arrested
  • Make any threats to do things that cannot legally be done or thing that the collector has no intention of doing.
 
A debt collector is not allowed to harass you. Keep good record of all communications with a debt collector: keep copies of any correspondence, write down dates and times of calls, and notes of what was discussed.
 
If you believe you’re dealing with an unscrupulous debt collector, contact the Consumer Financial Protection Bureau, the FTC or your state attorney general.
 
If you’ve been contacted by a debt collector and aren’t sure how to handle it, the Consumer Financial Protection Bureau has information and documents that can help.
 

DON’T

Be afraid to work with a credit counselor. If you’re dealing with a financial crisis, your options can be confusing and the task of managing the situation, daunting. Credit counseling agencies are generally non-profit and can advise you on your financial worries. Be prepared to discuss your financial situation, your employment status, financial goals, and detailed records of your income and expenses. A good credit counselor can help you assess how to best manage all your debits, and many offer initial budgeting sessions at no cost.
 

DO

Be careful when looking into debt relief. Debt consolidation isn’t for everyone and it won’t erase your debt. You could end up paying even more! Before you enroll in any program, understand how the program works. There are many different types of programs, and you should know and understand the positives and negatives of any one program. Understand, before signing up, if the company is offering a consolidation loan, credit counseling, debt settlement, or some other type of program.
 
If a debt settlement company required you to save up funds in an account, know that the money still belongs to you. You are entitled to withdraw money from that account at any time without penalty and the account must be administered by an independent third party.
 
And lastly, watch out for scams. Some thieves will attempt to take advantage of those struggling with debts. Be wary of any company that charges fees before it settles your debts. Upfront fees are a big red flag. Also, companies claiming to help you take advantage of a “new government program” should be avoided. And avoid any company that claims it can make your debts disappear. Your debts will need to be managed, and that will take time and effort on your part. If it sounds too good to be true, it likely is.
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