Steps to Take With a Collection Agency

For most people, the idea of communicating with a collection agency is not a fun prospect. If you ignore debts you owe to your creditors, however, you can expect debt collectors to begin calling and sending you letters. By staying informed about the proper steps to take when dealing with collection agencies, you can avoid the expense of hiring professional representation while also preventing a collection lawsuit.

Validate the Debt

Not all debt collectors are legitimate. Some scam artists commit fraud against unsuspecting consumers by claiming to represent a collection agency and requesting payment. Should a debt collector contact you, ask for the name and address of the company the collector represents and send the company a debt validation letter.

A debt validation letter is merely a written request for proof that the account in question is legitimate. The Fair Debt Collection Practices Act (FDCPA) notes that upon receiving your letter, the collection agency must provide you with proof of the debt before it conducts any further collection activity. The FDCPA does not, however, define what constitutes "valid proof."

Cease and Desist

If the collection agency cannot provide you with proof that you owe the debt it is attempting to collect, you can prevent the company's representatives from contacting you via a "cease and desist" order. The FDCPA requires debt collection companies to immediately cease all communication with a consumer if he puts his request in writing.

Negotiate With Collectors

If the collection agency legitimately owns your debt and validates it, contacting the company and making payment arrangements helps you avoid the negative consequences of a debt-collection lawsuit, such as wage garnishment and property liens. Although the collection agency does not have to accept your offer, you can offer to pay a portion of the debt instead of the full amount via a debt settlement. You can also offer the collection agency a payment plan in which you must submit regular payments each month until you pay off the full amount you owe.

Paying off a collection account does not improve your credit. Once the account appears within your credit file it will remain there for seven years -- paid or not. Fortunately, you can also include how the company reports the debt to the credit bureaus in your negotiations. Your ultimate goal in this endeavor should be to have the account removed from your credit record in its entirety.

Protect Yourself

Once you reach an agreement with the collection agency, ask for a copy of the agreement in writing before submitting your first payment. Having a copy of the agreement you hold with the company provides you with proof if the collection agency refuses to hold up its end of the bargain and you must seek legal recourse against the company.