A debt collector is an individual, or more often, a company, charged with the task of collecting money owed by a debtor who has fallen behind on payments or who has defaulted on a financial agreement. Companies that do this to earn their money are usually called collection agencies.

The Basics
A debt collector or collection agency won't get involved between a creditor and a debtor until the debtor misses a payment and doesn't resolve the situation with the creditor in a reasonable amount of time. A creditor won't immediately involve a debt collector for a late or missing payment because it's not cost effective to do so -- involving a debt collector means giving up some of the money the creditor stands to make if he can just get the debtor to pay up.

In the United States, accounts are generally permitted to reach up to thirty (30) days past due before they're sent off to collections. In some cases, even this first step is just an "in-house" shift -- the account goes to the creditor's collections department. Rarely, this step is skipped. During in-house collection attempts, phone calls are made to the debtor (at all numbers the creditor has on file) on an infrequent basis, and a "courtesy reminder" is given. Letters are sent to all addresses on file repeating the message -- it's always a polite, but firm message essentially saying "hey, looks like you forgot to pay us this month; please send us money to avoid further action". Whether delivered by phone or mail, the message always has a thinly-veiled threat of "further action".

Once in-house collection attempts fail, the account is usually sold (for a portion of its value) to a collection agency. These companies purchase defaulted accounts for less than the owed amount on the premise that enough of those accounts will ultimately be collected in full to make the effort to collect them profitable. Collection agencies are generally rude, inconsiderate, and persistent. They tend to underpay their employees and enjoy flaunting the law whenever possible. They send mail to the debtor regularly. They call daily. Even if the debtor instructs them not to call, they call. Even if the debtor says "I'm broke and cannot pay you," they continue to call.

If these collection efforts fail, the next course of action depends on a variety of factors. If the debt is secured, the collateral may be repossessed. This may or may not satisfy the debt; if a portion of the debt remains, the next options discussed here remain available. If the debt is unsecured and/or is of sufficient value to be worth the trouble, the collection agency may sue the debtor to attempt to force payment by wage garnish or other court order. If the account "isn't worth it", it's just written off. A negative entry is made on the debtor's credit report and the collection agency moves on with life.

How it Works in Real Life
Once your due date slips by without a payment, the creditor will almost immediately start making a few discreet phone calls. How quickly the next collection steps come is dependent on what you say and do in response to these calls. If you promise to pay and actually do so, end of story; you're okay. If you say "sorry, I'm broke, unemployed, and can't pay you," your creditor might actually work with you to put off payments, cancel/refund late fees and over limit fees, and help you through the rough spot. Of course, they might be complete dicks too. If you promise to pay and then don't, the harsher collection methods begin immediately.

In-house collection comes next. Large companies that lend money have whole departments and call centers dedicated to this process. The systems are automated these days -- think of how telemarketer's systems work and you have a good idea how it works here as well. The big computer has a big list of deadbeats and their phone numbers. It calls them all, frequently and repeatedly. If the phone call is picked up by a human, the call is transferred to a warm body in the call center who proceeds to ask about payment, threaten lawsuits, etc. If the phone call is ignored, the computer just calls back later. If the phone call is answered by an answering machine, some systems are sophisticated enough to leave half a message on the machine so you know someone called but couldn't program their PBX right. No matter what you say to these people if you actually answer their calls, they will continue to call until you have paid them or they decide to sue you or give up.

The calls come daily. For the billing period of May 1 through May 31 of this year, my cellular phone recorded over 250 phone calls from one creditor's collections department. They call at least five times per day; some days it goes up to eight.

After awhile, they do give up trying to talk to you. Ultimately, they ding your credit and either give up or sue you.

What Do I Do?
If a creditor or debt collector is bugging you, you've got some options, and a few laws on your side. Remember these helpful tips:

  1. Are they calling you every day? Every time they call, answer the phone. Hiding by ignoring the ringing (caller ID is great, isn't it?) just makes them call more often. Every time you speak with them, instruct them not to call again. Instruct them to communicate with you via mail only. Record the date and time you received the call, noting the name of the caller and the account in question. State laws vary, but in general once you've warned a collector off three times, if they keep it up, you can sue them (how's that for irony?). In theory you should only ever have to tell them once, but this world doesn't work that way. Wish I could flaunt the law like that.
  2. Are they calling you at work and/or talking to other people you know, such as family, friends, or coworkers? If they're calling you at work, demand they stop. Make it a demand. Don't even be polite. If they do it even once more, call a lawyer. If they're calling your family, friends, or coworkers, and have said anything at all about your account except "please have him call us", get a lawyer immediately -- that's against the law just about everywhere.
  3. Have they finally stopped calling, but now send threatening letters? Your response to this depends on two questions: 1) Is the debt legitimate (i.e. do you really owe the money?), and 2) if so, do you have the money (and ability) to pay it? If you answered "yes" to both, the "best" action to choose is to pay the debt. If you answered "no" to the first one, send, in writing, a challenge to the creditor. Insist they prove the debt is valid. Dispute the negative entry on your credit report. All of these actions should be free (or cost nothing more than a postage stamp). If you answered "yes" to #1 and "no" to #2, try telling the creditor this on the phone before insisting they communicate only in writing. If they're already on to the writing-only phase, mail a letter to the agent assigned to your account explaining your situation. It might help. It might not. Who knows?
  4. Are they going to try to repossess your property? If this is a car loan, they'll eventually come after your car. If you're feeling like an asshole, you can do things to hide the car from them and avoid the repo man -- garage the car in a rented storage unit, hide it at a friend's home (in a garage), or, if you're actually broke (or close) and live out of your car, move around a lot. If it's some other kind of property (not a house) that you can store indoors, do so. Keep it at home, safe. They can't just smash your door down and take your stuff.
  5. Are they suing you? Get a lawyer. If you're unemployed and/or broke, you should be able to find pro bono representation fairly easily. Ask the court you're being sued in for help with this. Also, file for bankruptcy if things look bad. This immediately ceases (legally) all collection actions against you, including lawsuits. If somebody still calls you to collect on a debt after you've filed for bankruptcy, you can own him.
The bottom line here is, essentially, not to let a debt collector harrass you. Yes, you might be a deadbeat, but at least for now, you have legal protection against harrassment.

In case anyone's curious, yes, I might soon be living out of my car; that's a serious suggestion.

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