How to Lower Interest Rates Through Collection Agencies

Congress passed the federal Fair Debt Collection Practices Act to help protect consumers against unfair debt collection procedures and deceptive practices. The act requires third-party collection agencies to provide each debtor with a validation notice within five days of first contact. The validation notice must include information regarding the origin of the debt, the name of the creditor and whom to contact to dispute the debt or to obtain additional information. The Federal Trade Commission is responsible for enforcing the act and has the authority to regulate collection agencies. To negotiate a lower interest rate, consumers must understand their rights under the Fair Debt Collection Practices Act.

Instructions

1

Review your validation notice. Collection agencies must send their validation notices in writing to inform consumers of their delinquencies. The validation notice must include the name of the creditor, the creditor's address, original loan amount and remaining loan balance. Because third-party collection agencies can purchase debts from creditors, they may be responsible for negotiating the debt and repayment.

2

Send a written letter to the collection agency within 30 days of receiving a validation notice. Under federal law, failure to contact the collection agency within 30 days is grounds for the agency to continue collection efforts under the assumption that the debt is uncontested and valid. If you contest the debt within 30 days, the collection agency must stop contacting you until it obtains proof of the debt's validity.

3

Calculate your net worth. Under federal law, collection agencies and creditors cannot take certain types of property to satisfy a consumer's debt. Furthermore, under the United States Code, collection agencies and creditors cannot garnish specific types of wages. If you receive Social Security income, pension benefits, unemployment benefits or federal welfare benefits, your creditors cannot garnish these payments. Furthermore, under the Department of Labor's minimum wage laws, collection agencies and creditors cannot garnish your wages if you earn minimum wage.

4

Review your validation letter and send a written offer to the collection agency. Send a copy of the letter to your creditor. In many cases, creditors and collection agencies will negotiate a lower interest rate and consider the remaining delinquency a write-off to avoid further costs.