December 9, 2005
Understanding the Collection Agency. Beating the Bill Collector, Series 3
<<<Note - this is NOT a discussion of what is legal and what is not legal, it is a discussion of how a Collector THINKS. Knowing how they think helps a debtor deal with them.>>>
UNDERSTANDING THE COLLECTION AGENCY
The first step in knowing how to deal with a Collection Agency is to get inside their heads and understand the Psychology of the Collection Agency. Once you understand that part, you can successfully deal with the CA Collector.
Nothing in this essay applies to Original Creditors, only third party debt collectors (3PDC’s). It makes no difference whether the 3PDC actually bought the debt or is just working the account for the Original Creditor (OC).
First, in most cases it is not generally productive to go back to the OC, since most 3PDC contracts with OC’s require the OC to bow-out of the collection picture. It is rare that the OC will override a 3PDC since the OC has already charged the account off as a loss, and the OC’s collection department has given up on collecting on their own efforts. Frankly, they really don’t care if you come back as a customer or not, but if you do, it will be as a CASH customer.
The only time an OC will pull an account back from a 3PDC is if the 3PDC is behaving so reckless that its actions are likely to land the OC in court along with the 3PDC. The 3PDC may or may not have attorneys on staff. Those attorneys may or may not be licensed to practice your state. The CA itself may or may not be licensed to practice in your state. These are things you can generally check on your own, before actually talking with a 3PDC.
While you are at it, research your state’s Statute of Limitations (SOL) for the type of debt the 3PDC is trying to collect. The SOL comes into play when you have not made any payment within the statutory period and the creditor (OC or 3PDC) has not started a suit in the statutory time. In many states, making a payment – any payment – on a debt re-starts the SOL.
The importance of knowing the SOL for your state cannot be stressed enough. If a debt is Outside of Statute (beyond the time frame of the Statute) then SOL becomes an Affirmative Defense if you are sued.
The purpose of the SOL is simple: the 4th Amendment to the US Constitution (and most State Constitutions, but applicable to the States by the 16th Amendment) guarantees a speedy trial. This applies to Civil matters also. The reason is simple – over time witnesses die or move away and documents get lost or destroyed. The SOL fixes a time where the creditor must sue or forget about it, and eliminates the “Justice to the Packrat” problem. SOL applies to the state in which you live at the time, not where you lived when the debt was incurred or where the 3PDC is located.
Types of 3PDC’s
There are basically two types of 3PDC’s: Letter writers and Collection Agencies.
Letter Writers only do just that – write letters.
The letters will direct you to contact the OC and will not demand payment be made to the 3PDC. One of the larger Letter Writer 3PDC’s is IC Systems.
Remember though – just because they are Letter Writers doesn’t mean they are not governed by FDCPA – they are. Collection Agency letters will want the payment sent directly to the Collection Agency – so they can be sure to deduct their commission before they send the remainder on to the OC.
Both types must have the mini-Miranda on their correspondence and must honor to Validation and Cease-Comm letters. What to do when the Collector calls It is unusual, but not uncommon, for a 3PDC ‘s first collection efforts to be by telephone. The reason has to do with the Fair Debt Collection Practices Act, which you should make yourself intimately familiar with. Also make yourself intimately familiar with the FTC’s Staff Opinion Letters.
FDCPA requires communications from a 3PDC to have the “mini-Miranda” warning on it. Failure to do so is a violation of law and gives you the right to sue the 3PDC. Telephone calls, especially outgoing telephone calls, are much harder to document that the mini-Miranda has been given. The time between receipt of the first letter and receipt of the first call can be long (a week or more) or short (next day). Whatever it is, use that time to learn as much as you can about the laws and the particular 3PDC.
How you handle the 3PDC will depend on whether the debt is still in Statute or not, how long before it is out of Statute. Needless to say, if your debt is out of Statute you can play the 3PDC for all you want, and there is little he can do about it.
The purpose of this would be to set him up for a FDCPA violation, then you can “zing” him with a suit. Let him rant and rave and make all sorts of veiled threats.
Document everything, ask him to put all hat in writing. Just remember, he cannot successfully sue you. Whether he knows this or not is questionable – probably not, since he calls every state in the nation and he can’t know every state’s SOL laws. It is a certainty his employer hasn’t provided him with that information. Most collectors’ training consists of “here’s your desk, here’s your phone, here’s your computer, now go collect the money.”
If you are near (within 3 to 6 months) of SOL, then by all means send the 3PDC a “Validation Letter” to stall for time. Also, include a limited Cease Communication letter, requiring Cease-Comm for all communications except by mail. Under FDCPA they are forbidden to dun you while the Validation Letter is unanswered.
The Cease-Comm letter makes any communication with you other than by mail a FDCPA violation, actionable in Court. If they call, just remind them that there is a Validation Letter outstanding and unanswered. Also be sure to remind them of the limited Cease-Comm letter and that this telephone call is an actionable violation. If they persist in asking for money, remind them that FDCPA imposes on them the requirement to validate the debt to you upon request, which you have made. Then ask them when they will be sending you your $1000 Statutory Damages for the FDCPA violation in ignoring the limited Case-Comm letter. If the debt is nowhere near the SOL, then you must take a more defensive stance.
By now you should have read the section on “Judgement proofing” yourself and have followed as many of those suggestions as are practical. By hiding assets that the creditor can attach, you are making yourself look like a more difficult case to actually collect from.
3PDC’s are paid commission, so they tend to concentrate on the bigger dollar cases (more commissions to collect) and the easier cases – the ones they can scare into fast payment in full quick commissions).
The harder cases – both harder to actually contact, and the ones with no known assets or income to attach, with the smaller balances and who don’t scare easily, are a 3PDC’s nightmare and end to get somewhat less attention than the easier cases. This doesn’t mean they won’t work I, but when they do you will have to convince them that there’s nothing in your pot for them to get.
What Motivates the 3PDC Since most 3PDC’s are paid by commission, they are obviously motivated by the “quick kill” – a debtor they can scare the pants off who will immediately go out and do whatever the 3PDC wants to make the 3PDC go away. This is the Collector’s dream – a quick, easy commission. There are people just like that. I hope, by now, you are not one of them.
A second motivation is the psychological one – a motivation that is so contrary to our psyche that it explains the high employee turnover in the Collection industry. That motivation is the desire to get others to do what the Collector wants them to do – regardless of the hardship it places on the other person. I call this “anti-mercy”.
A successful collector relishes the “satisfaction” of scaring a debtor witless. I have heard many 3PDC’s joke and boast about how much they scared a debtor, showing off the money sent by western Union or Courier like one would show off a Super Bowl Ring. Many 3PDC’s encourage this mentality by rewarding and promoting the most “productive” collectors.
Production, of course, measured by commissions, measured by dollars collected. The human cost of this activity is ignored. Competition among the collectors within a company is encouraged. The most common cutoff time is the end of the month, so many collectors get even more aggressive in the second half of the month. This competitiveness is a breeding ground for FDCPA violations, so be especially aware of the potential for violations in the second half of the month. Tools of the 3PDC The 3PDC relies on YOU to collect his debt.
Strange as it seems, it is YOUR fears, YOUR fantasies, YOUR misinformation and YOUR partial understanding of the truth that empowers the 3PDC, and each of these is a weapon to be used against you. By carefully stating half-truths and letting your imagination run away, the 3PDC can bend your mind so that it sees what truths the 3PDC wants it to see, and pictures a future that the 3PDC wishes was the truth, but you believe it to be truth. Let’s explore a couple of common half-truths, and see where the 3PDC wants your mind to wander.
1: “If you don’t pay $X now, we will take Legal Action.” Sound familiar? That’s the most common threat – Legal Action. Did the 3PDC say “Sue”? No, he said “Legal Action”. Just what IS “Legal Action”? Simple - it’s any action that is not ILLEGAL. So, all he said was “we will do something the law allows us to do.” That could be any or all of the following: Send another letter, make another phone call, discuss it with the collector at the next desk, discuss it with the Collector’s supervisor, do nothing at all, move on to the next debtor, go out for lunch, do a crossword puzzle….. you get the idea now. In part with this threat is to turn it over to the “Legal Department” (as opposed to the ILLEGAL Department).
2: “Your Credit will be trash if you don’t pay $X now.” Let’s get real – if you are talking with a 3PDC, the account has already been charged off and whatever damage they can do to your credit has already been done. No amount you can pay right now will un-do that, and the 3PDC will resist you tooth and nail in your efforts to trade payment for Trade Line removal. The reason (they will tell you) is that they are required to report it. That is half of the truth. The truth is IF they report it, they are required to report it ACCURATELY. There is no law requiring any lender to report to any credit bureau.
3: “Paying this bill will help your credit”. Saying that is like telling the passengers on the Titanic that, while the Ocean underneath them is 10,000 feet deep, if they just swim 100 yards away the ocean is only 9800 feet deep. The boat sank anyway and they drowned. The depth of the ocean meant nothing at THAT depth. Same thing with your Credit Report. A Paid Charge Off is better than an UNPAID Charge Off, but not enough to convince a lender to approve a loan. Time is what heals this wound, not payment.
4: “Are you going to pay this debt or not. I need an answer right now.” A similar statement is “we must reach resolution on this account now.” The only problem is – if you knew how you were going to pay, wouldn’t you already be doing it? Obviously, you cannot “resolve” the matter on HIS timetable. He will twist any statement other than a promise to pay immediately into “So you refuse to pay this debt.” To this kind of aggressiveness I would merely say something like “I will know how I will resolve this and other matters when I can see a comprehensive resolution” and stick to it.
I will not get into the personal attacks the 3PDC will launch against you – statements like “What kind of example are you giving your children – you’re not mature enough to pay your bills” or “If you had any self-respect you would honor your obligations”. To these stupid statements you need not remain civil.
The 3PDC will keep you on the phone until he wears down your resistance. The longer you are on the phone, the more time he has to launch every psychological attack against you he can until he finds your “hot button”. Don’t let him. Stay on the phone no more than 3 minutes unless you see REAL progress being made (progress meaning helping you reach a resolution you can live with).
UNDERSTANDING THE COLLECTION AGENCY
The first step in knowing how to deal with a Collection Agency is to get inside their heads and understand the Psychology of the Collection Agency. Once you understand that part, you can successfully deal with the CA Collector.
Nothing in this essay applies to Original Creditors, only third party debt collectors (3PDC’s). It makes no difference whether the 3PDC actually bought the debt or is just working the account for the Original Creditor (OC).
First, in most cases it is not generally productive to go back to the OC, since most 3PDC contracts with OC’s require the OC to bow-out of the collection picture. It is rare that the OC will override a 3PDC since the OC has already charged the account off as a loss, and the OC’s collection department has given up on collecting on their own efforts. Frankly, they really don’t care if you come back as a customer or not, but if you do, it will be as a CASH customer.
The only time an OC will pull an account back from a 3PDC is if the 3PDC is behaving so reckless that its actions are likely to land the OC in court along with the 3PDC. The 3PDC may or may not have attorneys on staff. Those attorneys may or may not be licensed to practice your state. The CA itself may or may not be licensed to practice in your state. These are things you can generally check on your own, before actually talking with a 3PDC.
While you are at it, research your state’s Statute of Limitations (SOL) for the type of debt the 3PDC is trying to collect. The SOL comes into play when you have not made any payment within the statutory period and the creditor (OC or 3PDC) has not started a suit in the statutory time. In many states, making a payment – any payment – on a debt re-starts the SOL.
The importance of knowing the SOL for your state cannot be stressed enough. If a debt is Outside of Statute (beyond the time frame of the Statute) then SOL becomes an Affirmative Defense if you are sued.
The purpose of the SOL is simple: the 4th Amendment to the US Constitution (and most State Constitutions, but applicable to the States by the 16th Amendment) guarantees a speedy trial. This applies to Civil matters also. The reason is simple – over time witnesses die or move away and documents get lost or destroyed. The SOL fixes a time where the creditor must sue or forget about it, and eliminates the “Justice to the Packrat” problem. SOL applies to the state in which you live at the time, not where you lived when the debt was incurred or where the 3PDC is located.
Types of 3PDC’s
There are basically two types of 3PDC’s: Letter writers and Collection Agencies.
Letter Writers only do just that – write letters.
The letters will direct you to contact the OC and will not demand payment be made to the 3PDC. One of the larger Letter Writer 3PDC’s is IC Systems.
Remember though – just because they are Letter Writers doesn’t mean they are not governed by FDCPA – they are. Collection Agency letters will want the payment sent directly to the Collection Agency – so they can be sure to deduct their commission before they send the remainder on to the OC.
Both types must have the mini-Miranda on their correspondence and must honor to Validation and Cease-Comm letters. What to do when the Collector calls It is unusual, but not uncommon, for a 3PDC ‘s first collection efforts to be by telephone. The reason has to do with the Fair Debt Collection Practices Act, which you should make yourself intimately familiar with. Also make yourself intimately familiar with the FTC’s Staff Opinion Letters.
FDCPA requires communications from a 3PDC to have the “mini-Miranda” warning on it. Failure to do so is a violation of law and gives you the right to sue the 3PDC. Telephone calls, especially outgoing telephone calls, are much harder to document that the mini-Miranda has been given. The time between receipt of the first letter and receipt of the first call can be long (a week or more) or short (next day). Whatever it is, use that time to learn as much as you can about the laws and the particular 3PDC.
How you handle the 3PDC will depend on whether the debt is still in Statute or not, how long before it is out of Statute. Needless to say, if your debt is out of Statute you can play the 3PDC for all you want, and there is little he can do about it.
The purpose of this would be to set him up for a FDCPA violation, then you can “zing” him with a suit. Let him rant and rave and make all sorts of veiled threats.
Document everything, ask him to put all hat in writing. Just remember, he cannot successfully sue you. Whether he knows this or not is questionable – probably not, since he calls every state in the nation and he can’t know every state’s SOL laws. It is a certainty his employer hasn’t provided him with that information. Most collectors’ training consists of “here’s your desk, here’s your phone, here’s your computer, now go collect the money.”
If you are near (within 3 to 6 months) of SOL, then by all means send the 3PDC a “Validation Letter” to stall for time. Also, include a limited Cease Communication letter, requiring Cease-Comm for all communications except by mail. Under FDCPA they are forbidden to dun you while the Validation Letter is unanswered.
The Cease-Comm letter makes any communication with you other than by mail a FDCPA violation, actionable in Court. If they call, just remind them that there is a Validation Letter outstanding and unanswered. Also be sure to remind them of the limited Cease-Comm letter and that this telephone call is an actionable violation. If they persist in asking for money, remind them that FDCPA imposes on them the requirement to validate the debt to you upon request, which you have made. Then ask them when they will be sending you your $1000 Statutory Damages for the FDCPA violation in ignoring the limited Case-Comm letter. If the debt is nowhere near the SOL, then you must take a more defensive stance.
By now you should have read the section on “Judgement proofing” yourself and have followed as many of those suggestions as are practical. By hiding assets that the creditor can attach, you are making yourself look like a more difficult case to actually collect from.
3PDC’s are paid commission, so they tend to concentrate on the bigger dollar cases (more commissions to collect) and the easier cases – the ones they can scare into fast payment in full quick commissions).
The harder cases – both harder to actually contact, and the ones with no known assets or income to attach, with the smaller balances and who don’t scare easily, are a 3PDC’s nightmare and end to get somewhat less attention than the easier cases. This doesn’t mean they won’t work I, but when they do you will have to convince them that there’s nothing in your pot for them to get.
What Motivates the 3PDC Since most 3PDC’s are paid by commission, they are obviously motivated by the “quick kill” – a debtor they can scare the pants off who will immediately go out and do whatever the 3PDC wants to make the 3PDC go away. This is the Collector’s dream – a quick, easy commission. There are people just like that. I hope, by now, you are not one of them.
A second motivation is the psychological one – a motivation that is so contrary to our psyche that it explains the high employee turnover in the Collection industry. That motivation is the desire to get others to do what the Collector wants them to do – regardless of the hardship it places on the other person. I call this “anti-mercy”.
A successful collector relishes the “satisfaction” of scaring a debtor witless. I have heard many 3PDC’s joke and boast about how much they scared a debtor, showing off the money sent by western Union or Courier like one would show off a Super Bowl Ring. Many 3PDC’s encourage this mentality by rewarding and promoting the most “productive” collectors.
Production, of course, measured by commissions, measured by dollars collected. The human cost of this activity is ignored. Competition among the collectors within a company is encouraged. The most common cutoff time is the end of the month, so many collectors get even more aggressive in the second half of the month. This competitiveness is a breeding ground for FDCPA violations, so be especially aware of the potential for violations in the second half of the month. Tools of the 3PDC The 3PDC relies on YOU to collect his debt.
Strange as it seems, it is YOUR fears, YOUR fantasies, YOUR misinformation and YOUR partial understanding of the truth that empowers the 3PDC, and each of these is a weapon to be used against you. By carefully stating half-truths and letting your imagination run away, the 3PDC can bend your mind so that it sees what truths the 3PDC wants it to see, and pictures a future that the 3PDC wishes was the truth, but you believe it to be truth. Let’s explore a couple of common half-truths, and see where the 3PDC wants your mind to wander.
1: “If you don’t pay $X now, we will take Legal Action.” Sound familiar? That’s the most common threat – Legal Action. Did the 3PDC say “Sue”? No, he said “Legal Action”. Just what IS “Legal Action”? Simple - it’s any action that is not ILLEGAL. So, all he said was “we will do something the law allows us to do.” That could be any or all of the following: Send another letter, make another phone call, discuss it with the collector at the next desk, discuss it with the Collector’s supervisor, do nothing at all, move on to the next debtor, go out for lunch, do a crossword puzzle….. you get the idea now. In part with this threat is to turn it over to the “Legal Department” (as opposed to the ILLEGAL Department).
2: “Your Credit will be trash if you don’t pay $X now.” Let’s get real – if you are talking with a 3PDC, the account has already been charged off and whatever damage they can do to your credit has already been done. No amount you can pay right now will un-do that, and the 3PDC will resist you tooth and nail in your efforts to trade payment for Trade Line removal. The reason (they will tell you) is that they are required to report it. That is half of the truth. The truth is IF they report it, they are required to report it ACCURATELY. There is no law requiring any lender to report to any credit bureau.
3: “Paying this bill will help your credit”. Saying that is like telling the passengers on the Titanic that, while the Ocean underneath them is 10,000 feet deep, if they just swim 100 yards away the ocean is only 9800 feet deep. The boat sank anyway and they drowned. The depth of the ocean meant nothing at THAT depth. Same thing with your Credit Report. A Paid Charge Off is better than an UNPAID Charge Off, but not enough to convince a lender to approve a loan. Time is what heals this wound, not payment.
4: “Are you going to pay this debt or not. I need an answer right now.” A similar statement is “we must reach resolution on this account now.” The only problem is – if you knew how you were going to pay, wouldn’t you already be doing it? Obviously, you cannot “resolve” the matter on HIS timetable. He will twist any statement other than a promise to pay immediately into “So you refuse to pay this debt.” To this kind of aggressiveness I would merely say something like “I will know how I will resolve this and other matters when I can see a comprehensive resolution” and stick to it.
I will not get into the personal attacks the 3PDC will launch against you – statements like “What kind of example are you giving your children – you’re not mature enough to pay your bills” or “If you had any self-respect you would honor your obligations”. To these stupid statements you need not remain civil.
The 3PDC will keep you on the phone until he wears down your resistance. The longer you are on the phone, the more time he has to launch every psychological attack against you he can until he finds your “hot button”. Don’t let him. Stay on the phone no more than 3 minutes unless you see REAL progress being made (progress meaning helping you reach a resolution you can live with).
# posted by Sponduliqs @ 9:45 AM 
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