Have you ever received a dunning call from a bill collector? If you have lost your job or faced an unexpected financial crisis, you may find yourself making difficult choices. When funds are limited, most people will choose to scrape together the cash to pay the mortgage, the car payment, or the IRS and take their chances with credit card collectors.
As credit card default rates rise, however, credit card lenders have become far less gracious or forgiving when it comes to dealing with late payments. These unsecured lenders also know that recovery rates are significantly higher for newly delinquent borrowers as opposed to debt that is 60, 90, or 120 days old. It should come as no surprise, then, that consumers who find themselves with mounting debts for the first time and no real hope to pay also find themselves on the receiving end of calls from aggressive collectors.
Bill collectors rely on time-tested psychology to press anxious consumers to pay credit card bills instead of their mortgage, car payments, or even tax payments. If you find yourself on the receiving end of one of these aggressive calls, here are a few tips to keep in mind:
- Unsecured debt is not tied to any particular property. Creditors cannot use "self-help" like an automobile lender, or foreclose like a mortgage lender. In a worst case scenario, a credit card lender has to file a lawsuit against you, win a judgment, and turn that judgment into a wage garnishment or bank account levy - a process that takes time and money.
- Mortgage debt, car loan debt, tax debt, and child support debt is more "important" than credit card debt. You should not feel guilty about your decision to allocate scarce resources towards higher priority debts.
- There is no such thing as debtor's prison in the United States. No matter how much you owe, you will never go to jail for not paying a credit card debt.
- Never give a credit card bill collector authority to electronically remove money from your bank account. If you have done this, cancel the authorization in writing by sending a revocation to the lender, the collection agency, and your bank.
- Verbal promises by bill collectors are worth nothing. If an agreement is not in writing, it does not exist.
- Credit card collectors will rarely file suit until your debt is at least three months delinquent. The three months delinquency date is also the time when these lenders are most willing to compromise.
- If you do not already have caller ID, get it now. The law does not require you to speak to a bill collector.
- Bill collectors, as opposed to collection departments at the actual lender company, are subject to specific rules that govern and limit their conduct. If you believe collection calls are becoming abusive (i.e.: cursing, threats, excessive calls, calls early in the morning or late at night), you may have a cause of action under the Fair Debt Collection Practices Act.
The big picture here is that even if you owe money, you can and should assert some control over the discussions with your creditors. If you see no immediate solution to your problems, seek counsel with a qualified bankruptcy attorney in your area. Bankruptcy is a last resort, but you need to find out as early as you can whether it is an option at all, and you need to learn about transaction and financial moves that could create problems for you if you ended up in bankruptcy.