Most people aren’t thrilled to hear from a debt collector. But a reader, Marc, would like to hear from his a little more often. He asked us whether he’s entitled to statements if he is making payments.
It’s a great question. Over the years, we’ve heard from many borrowers who are experiencing the frustration of sending payments in and not knowing whether they were being properly applied, or whether late fees, interest or other charges were being added to their balances. Do debt collectors at least have to let you know payment has been received and applied to your balance?
We asked Michael Bovee, founder of the Consumer Recovery Network and a Credit.com contributor, and his answer was… it can depend on where you live. “New York and Florida require the documentation of payment plans, like sending out statements monthly or quarterly at a minimum,” he said. “And California’s Fair Debt Buying Practices Act requires collectors of purchased debt to provide detailed account information within 30 days of any payments.”
But what if you’re not covered by those? It’s best to get an agreement in writing, but if a collector presses you to agree over the phone, let them know you are recording the call to protect your own interests, and then do it, Bovee advised. That way, you have evidence of the agreement you made in case there is disagreement about the terms later. It’s also smart to make a note of the collector’s name and the time of the call. After that, regardless of the accounting sent by the agency (or not), he said it’s important to keep careful records of payment amounts and dates.
Bovee said he thinks statements will be required in all 50 states in the near future. The Consumer Financial Protection Bureau is looking into how debt collectors interact with consumers, he said, and “I expect that sometime next year we will see rules from the CFPB that could require collection accounts that are settled, or entered into monthly payment plans, be documented via mailed statements and/or available online through a customer portal. It will be a very welcome development in the fair treatment of consumers if collection attorneys are required to provide an accurate accounting when entering payment plans (whether collecting through the courts or not).”
If you’re getting calls now, and pressure to enter into a payment agreement, Bovee suggests countering with a lump-sum offer. “I am a huge fan of negotiating one-time lump-sum settlements …. Paying off an old debt for less than the balance owed, and in a single payment transaction, is an ideal way to get your finances back on track.”
You should be aware, though, that it’s not necessarily going to get your credit back on track. Paying or settling a debt doesn’t necessarily remove it from your credit report. In some cases, you may be able to negotiate that as part of the deal, but some companies have policies against it. Still, rebuilding your credit may be easier when you do not have the additional stress of dealing with a collector. If, like many people being pursued by collectors, you haven’t even wanted to know exactly how bad your credit has become, now’s the time to take a look. Some credit card issuers offer free scores on statements, and Credit.com offers a free credit report summary with two scores and an action plan for improvement.
More on Managing Debt:
- The Credit.com Debt Management Learning Center
- The Best Way to Loan Money to Friends & Family
- Top 10 Debt Collection Rights