How To Deal With A Collections Agency

While Benzinga mostly covers actionable trading ideas and news stories, we've decided to delve a bit deeper into personal finance.

The team at Benzinga would like to assist readers with not just their investing endeavors, but their financial lives as a whole. And today, we continue this effort with a discussion of how to deal with a collections agency.

Being knee-deep in debt is stressful on its own. However, having a collector calling you every day increases the pressure. Let's discuss a few tips on getting through this situation.

Know Your Rights

A collector must abide by The Fair Debt Collection Practices Act while pursuing your debt. Under it, he must:

• Identify himself as such in every communication
• Provide verification of the debt
• Only call between 8 am and 9 pm local time
• Honor your written request to cease communication
• Not make bogus threats

This Act also provides numerous other protections, so review it here if a collector has recently contacted you.

Keep a Paper Trail

Bankrate.com suggests asking the debt collector to provide written notice of the name of the creditor, the amount you owe and how to handle potential disputes.

Any disputes should be sent in writing within 30 days. Doing so prevents the collector from legally contacting you again until it provides proof (such as a bill) you owe the debt, according to Bankrate.com. Send it and any other important communications via certified mail, return receipt requested, to obtain proof of receipt and keep a copy for yourself.

Also, Bankrate.com recommends taking notes on all verbal communications and keeping all written records in a dedicated file.

Don't Marry the Collector

An unscrupulous collector may (illegally) harass you by calling multiple times per day. With this in mind, financial expert Dave Ramsey suggests speaking to him no more than once every two weeks. If the collector insists on harassing you, inform him you won't speak again until he behaves – then hang up.

On this note, collectors are also prohibited from using abusive or profane language. The above advice also works in this circumstance. Document any instances in which you believe the collector has violated your legal rights.

Related: Kids Need Credit Cards Like They Need Cigarettes

Pretend You're in Court

Bankrate.com suggests saying as little as possible to a collector. After all, he could use anything you say against you to pursue the debt or file a lawsuit.

Negotiate

Collectors are often paid on commission, not by the hour. As such, they have an interest in collecting as much as possible in a short time frame.

You can use this to your advantage by offering a lump sum payment for less than the full amount owed. Determine the maximum you can afford to pay and don't accept anything higher.

Finalize the deal in writing before paying a dime.

Related: Tips for Setting a Budget