Negotiating With Collection Agencies And Debt Collectors - What you must know to be successfulBefore you begin negotiating with collection agencies you want to be very clear about what you want to accomplish.
Negotiating with collection agencies could be for two main reasons which would be to settle the debt and put it behind you which would stop the annoying or harassing phone calls or to restore or improve your credit rating so that you can begin to get approved for consumer loans for cars, homes and other types of purchases made using credit.
If your goal is to ultimately do both of the above then you want to begin the negotiation process as soon as possible. Negotiating with collection agencies involves a lot of time and patience, a settlement is not always reached quickly.
Most third party collection agencies pay pennies on the dollar for debt which they buy and their ultimate goal is to try and collect as much as possible. On a debt that was originally $5000 for example, a collection agency would want you to believe that you needed to pay the whole $5000 or more in order to settle the debt.
It is likely that they only paid as little as 20% to the original creditor to get the rights to own the debt and collect from you, in this example they paid $1000. Any more collected over and above $1000 is profit for them, this is the reason the collection industry is very lucrative.
Now that you understand this you want to negotiate the least amount possible. The collection agent could start out asking you to pay $6500, with an explanation of late charges, fees and expenses as the reason. The technique for them is to start as high as possible so that if they get you to agree to pay $3500 they have won!
Don’t fall for it.
Again you want to pay as little as possible to settle the account and the rule is that if you are not embarrassed by your settlement offer then you are offering too much!
Keep in mind that you do not know what amount they paid for the debt so no offer is too low.
Expect the representative that you are speaking with to hold their ground for a while, one phone conversation usually will not bring the deal to a conclusion and expect a deal to be reached only after a few discussions over the phone.
Most collection representatives work on a commission basis so the longer you can hold out the better deal you will be able to make.
If credit restoration or improvement is one of the main goals you plan to accomplish by paying collection agencies then you want to also have them agree to delete their entry from your credit report as part of the settlement reached.
You want to make sure you get this in writing, so that in a worst case scenario you can use this letter to dispute the item yourself with the credit bureaus.
There are three other very important things to remember when dealing with collection agencies…
1, NEVER give them any bank account information. If you come to an agreement you want to use a third party payment service such as western union. 2, Make sure you get any detailed agreement in writing. 3, Never tell the collection agency your reason for settling the debt. If they know you need to do it to close on a home loan they will stand firm and ask for the highest amount possible! Recent Fair Debt Collection Practices Act pages you might be interested in:
Collection Agency Laws
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