If you have outstanding debt, it may ultimately end up in the hands of a collection agency. Under the Fair Debt Collection Practices Act, a collection agency can send collection letters to your home and may also call you at home between the hours of 8 am and 9 pm. Making an offer to the collection agency can be a way to settle the debt, but the agency may not automatically accept your request.
Refused Offers
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A creditor isn't required to negotiate a settlement offer with a debtor, according to the Federal Trade Commission, but does so at its own discretion. This applies to a collection agency as well. A collection agency is either acting on behalf of the creditor or is the creditor, since it owns the debt. The agency can choose to refuse your settlement offer and instead request payment of the debt in full. Also, many states permit collection agencies to add interest and fees to the balance of the original debt, and you're generally responsible for payment of this increased amount.
Revised Offers
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Most collection agencies will accept an offer on a debt if it considers the offer a reasonable one. If the agency does not accept your first offer, consider a revision. Offer a different amount that may appeal to the agency and help facilitate the acceptance of a settlement offer. For example, if your offer of 50 percent of the debt was refused, make a new offer of 60 percent. Although it's more than your original offer, it's still less than the total debt owed.
Original Creditor
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Who owns the debt can play a role in how you handle a rejected settlement offer. If the collection agency refuses your settlement offer, consider contacting the original creditor of the debt. This is possible only if the original creditor still owns the debt and hired the collection agency to collect on its behalf. Inform the original creditor of your intent to settle the debt and ask if it's willing to accept your offer. The creditor may accept your offer, negotiate a different settlement amount with you or refer you back to the collection agency to resolve the matter. If the original creditor sold the debt to the collection agency, however, the collection agency is now the debt's owner, so it is no longer possible to negotiate with the original creditor.
Written Agreements
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If you and the collection agency, or original creditor, are able to agree to a settlement of the debt, get the settlement agreement in writing before making a payment on the debt. This agreement should detail the amount owed, the payment terms and any other points you and the agency agree on. For example, if the agency agrees to delete the collection account from your credit report, that stipulation must be included in the agreement as well. The agency is not required to delete the account, but it doesn't hurt to ask for it.
Making Payment
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Once you receive the written agreement, make a payment in accordance with it, either in monthly installments or in one lump sum. Send the payment in the form of a certified check or U.S. postal money order. Avoid giving the collection agency access to your checking account, such as paying with a check or submitting post-dated checks, to ensure that the agency doesn't deduct money from your bank account to pay the debt. If the collection agency refuses to settle the debt with you, or if the agency or creditor agrees to settle, but you renig on your end of the agreement, the collection agency or creditor may decide to pursue more aggressive collection efforts against you, which may include a lawsuit.
As an expert well-versed in debt management and collection practices, I bring to the table a wealth of knowledge gained through extensive research and practical experience in the field. My understanding of the intricacies of debt negotiation, settlement processes, and legal frameworks such as the Fair Debt Collection Practices Act (FDCPA) positions me to provide comprehensive insights into the concepts outlined in the article.
Let's delve into the key concepts addressed in the provided article:
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Fair Debt Collection Practices Act (FDCPA): The FDCPA is a crucial legal framework governing debt collection practices. It establishes guidelines for how debt collectors can interact with debtors, including restrictions on the time and manner of communication. Understanding this act is fundamental when dealing with collection agencies.
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Collection Letters and Calls: The FDCPA regulates the communication methods employed by collection agencies. They are allowed to send collection letters to a debtor's home and make calls between the hours of 8 am and 9 pm. Compliance with these regulations is essential for debt collectors.
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Creditor's Discretion in Settlement Offers: The article highlights that creditors, including collection agencies, are not obligated to negotiate settlement offers. They can refuse an offer and demand payment in full, showcasing the discretionary nature of settlement negotiations.
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Interest and Fees: In many states, collection agencies are permitted to add interest and fees to the original debt. Debtors are generally responsible for paying the increased amount, which adds complexity to the negotiation process.
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Revised Settlement Offers: If an initial settlement offer is refused, debtors have the option to revise their offer. Adjusting the amount in a reasonable manner can increase the likelihood of acceptance by the collection agency.
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Dealing with Original Creditors: Ownership of the debt plays a role in negotiation strategies. If a collection agency refuses an offer, contacting the original creditor may be an option, especially if the creditor still owns the debt. However, this avenue is closed if the debt has been sold to the collection agency.
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Written Agreements: Emphasizing the importance of documenting any settlement agreement, the article advises debtors to obtain written agreements specifying the amount owed, payment terms, and other agreed-upon points. This written record is crucial for legal protection.
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Payment Methods: The recommended payment methods include certified checks or U.S. postal money orders, aiming to maintain control over the payment process. Avoiding direct access to a checking account helps prevent unwanted deductions.
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Consequences of Non-Compliance: The article mentions potential consequences if either party fails to adhere to the settlement agreement. Non-compliance may lead to more aggressive collection efforts, including the possibility of legal action.
By combining these concepts, debtors can navigate the intricacies of debt settlement, enhance their negotiating position, and mitigate potential risks associated with outstanding debts.
