Make Credit Vultures Prove You Owe

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In my last column I wrote about my Kafkaesque experience with a collection agency that was trying to shake me down for money I didn't owe. That didn't make me particularly happy, so I want to make life as hard as possible for these debt collectors.

I want to make them fight tooth and nail for every penny they pry out of their victims. I'm happy to help anyone who's being harassed by a collection agency, not out of the kindness of my heart, but because I now have a deep and abiding hatred for debt collectors.

In my last column I gave you some advice about what to do if a collector tries to intimidate you into paying a debt that isn't yours, but what if you believe you actually owe them money?

Rule No. 1 in our quest to give collection agencies the middle finger: Find out if you owe anything. Let's make these vultures do some work for us. There's a strategy called debt validation. This is also pretty complicated, and you'll learn more about it from this Web site than you will from me.

Basically, you demand that the collector provide you with documentation proving that you actually owe them money. If they can't come up with the right paperwork, you don't pay them a dime. And they have to stop calling and mailing you. It's the law, and in this situation they'll actually have to obey it.

What is the right paperwork? The collection agency needs to send you proof that it either owns the debt, or has been "assigned" it, meaning that the company that originally lent you the money has legally entitled them to collect from you. That means you need to see the contract between the company you originally borrowed from and the collection agency.

They also need to show you a copy of the original agreement you made with the company you originally borrowed from, and account statements from that same original creditor. If they can't furnish you with these, you don't need to pay them. For more detail, I again recommend going to this site, which helped me stop Allied Interstate from harassing me on a daily basis:

OK, let's go with the worst of all scenarios. These credit losers come up with evidence that you owe money.

This brings us to Rule No. 2: Don't admit it. When talking to a collection agent, assume you've just been arrested. Anything you say can and will be used against you, possibly in a court of law. So don't give these shysters any information over the phone. And even if you believe you truly do owe them money, don't believe a single world a collection agent says. They will happily lie and make idle threats in order to intimidate you into paying, but it's important to recognize that they're just hustlers.

It's a delight to give you some good news here. In giving you good news, we're also kicking these debt collectors in the soft parts.

Rule No. 3: Just because you owe money is no reason to pay it. Here, there's just one thing to consider: How old is the debt? Collection agencies will often threaten to take you to court over unpaid bills, but there's a statute of limitations on most kinds of debt.

For example, if you've got a credit card bill that's gone unpaid for six years in New York and a collection agency tries to take you to court for that debt, you will win because the statute of limitations on that debt has expired. Here's a great chart of different statutes of limitations for different kinds of debt in each state:

If it turns out the statute of limitations has expired on your debt, then you don't legally owe these hustlers money. It doesn't matter how much chest thumping they do or what they say, that debt is dead. If they try to take you to court anyway, just bring documentation showing that you've owed the money for a period of time greater than the statute of limitations in your state.

If we're talking about credit card debt, for example, the countdown on the statute of limitations starts on the day of your last payment to the credit card company.

Now, let's spend a little time on the dreaded possibility that you owe money and these credit jerks are threatening to put a blemish on your credit report. So, should you pay up? No way. Don't think that you need to pay them the full amount that you owe. That's the last thing you should do.

Remember, debt collectors buy up delinquent debt for next to nothing -- pennies on the dollar -- so they're turning a profit if they get only 20% or 30% of what you owe. You have the upper hand with these people. They're only predators if you let them push you around. Some collectors might claim you owe late penalties; you don't.

When you negotiate with them, do it by certified letter because that's the only way you should ever correspond with a collection agency, so that there is a record of your correspondence, start low, and don't agree to pay more than half of what you "owe."

Believe me, these collection agents work on commission and really don't expect very many of their "consumers," as they call their victims, to pay them back. A collection agent will be absolutely thrilled if you're willing to pay back half of what they claim you owe (but you should still try to get away with less).

Make sure the collector agrees, in writing, to remove its listing from your credit report. It costs them nothing to do this. You don't want your credit report to show that the account was "paid as agreed" or "settled," because you've still got a collection account on your credit report, and that still hurts your credit.

One last piece of advice, the folks at CreditInfoCenter.com recommend that you pay with a cashier's check, never a personal check, and retain a copy of it for your records so that the collection agency doesn't get your bank information or "lose" its record of your payment and come after you again.

Trust me, one conversation with these losers is one too many.

But now, if these credit jerks come after you, even by mistake, you're ready for the brawl. Don't you feel better, already?

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