Coming Soon: More Debt Collectors

ADVERTISEMENT

The FDIC wants to get out of debt as badly as you do.

CNN estimates the FDIC incurred $45.4 billion in debt when it took over failing banks in 2008-09.  Now, to alleviate this burden, it is selling portions of this debt to third parties.

Bill Bartmann , debt expert and creator of America’s largest debt-buying and debt-collection company, estimates that more than $4 billion in distressed assets have been distributed by the FDIC to the collection industry. In addition, banks such as Chase (Stock Quote: JPM), General Electric (Stock Quote: GE), Bank of America (Stock Quote: BAC) and HSBC (Stock Quote: HBC) have sold off more than $8 billion in consumer paper. The resulting influx of debt collectors means that those among us who actually owe the money may need a refresher course for dealing with these unpleasant phone calls.

Here are some simple rules to follow when the debt collector calls:

Rule #1: Call them back.

Stop ignoring those calls, because no, they’re not going away. In fact, a better course of action, Bartmann suggests, is to get in touch with collectors first.  “All creditors have a number on the back of their monthly statement,” he explains, “If you know you are going to be unable to pay when due, call them and explain your circumstances. They will be impressed and amazed with your integrity.”

Rule #2: Be honest.

If you can’t pay, let them know. Granted, you should avoid a long-winded and highly unnecessary sob story.  Debt collectors don’t care about your mother’s brother’s cousin’s dog’s emergency vet visit and they are not are going to believe that you are in Finland.

“You aren’t trying to beat the creditor out of the money,” Bartmann says. “You simply are unable to pay the full amount at the present time.”

Rule #3: Offer to pay them back … a little.

Try to re-negotiate a payment plan.  By offering to pay a small amount of money (as in $5 or $10) over a long period of time, you show credibility. Bartmann maintains “Most creditors will not take collection action against someone that has demonstrated they are willing to work with the creditor.”

That being said, once the terms of your new payment plan are set, you need to adhere to them (i.e. send full payments in on time).

Rule #4: Know your rights.

You owe money, not a pound of flesh, and there are regulations in place that prevent collections agencies from taking things too far. So, while a debt collector can call and, even, yell over the telephone, he or she can only do so between the hours of 8 a.m. and 9 p.m. You can also request that collectors not call you at work.  And, more notably, no one can threaten your life. For a thorough explanation of the other restrictions in place, check out the Federal Trade Commission’s 2010 Fair Debt Collection Practices Report to Congress.

Rule #5: Stop spending money.

The trick, obviously, is to get out of debt, not to drag yourself further into it.  Managing debt collectors can be avoided if you manage your money instead. Cutting out luxury items and/or daily indulgences from your budget can slow your financial bleed.

“When times were good we allowed ourselves to enjoy some hard-earned luxuries,” Bartmann says. “In these new times, we will have to forego some of those previous luxuries.  The sooner we take this action, the sooner we dig ourselves out of this hole.”

Assessing what got you into debt in the first place can also prevent future pitfalls.  The trick is to stop the cycle so that once debt collectors are gone, they’re gone for good.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

Show Comments

Back to Top