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The Psychology of Debt Collection: Avoid the Manipulation

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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.

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About Jonathan Ginsberg

  • Brunelleschi

    A bank can only hold the debt for 6 months I think.

    Just before the deadline, they will try one more time.

    Sometimes you can negotiate for 50% of the amount just to keep it from being sold to a collector.

    You may be able to take the balance, negotiate 50%, and divide the remaining 50% into, say, 4 payments. Make one of those and the bank can back off. This is better than a write-off to a collector.

    If it goes to the collector, you can be assertive and tell the collector they wasted their money, and all they will get is 40%, take it or leave it. Start from there and you will get a settlement. Time is on your side at this point. Just be stubborn and they will eventually take it and move on.

    Don’t take abuse from anyone!

    If they start to lecture you, tell them you really don’t care and to shut up.

    The more you let either the bank, or the collector you know the program and you won’t play without a settlement, the easier it gets. Don’t go over 60%.

  • http://www.youtube.com/watch?v=hHJG-iVowxU Depression 09

    watch my video of me messing around with the CC company ….don’t fear their calls , enjoy them … laugh about the money they you owe them , prank them ..

    check out my video on youtube where i prank the CC company , it’s called pranking the CC company

  • http://www.diydebtsettlementkit.com John

    ABC News reported last week that credit card companies are giving debt collectors more room to negotiate settlements with cardholders who are falling behind (“Credit Card Companies Forgive Some Debt” by Elisabeth Leamy, Jan 19, 2009). In the article it said that some banks have cancelled as much as 70 percent of a debt just to avoid losing 100 percent to bankruptcy. Eric Dash reported in the New York Times that Bank of America reduced balances for about 700,000 accounts. Times are tough for consumers and creditors, and creditors are willing to negotiate.

  • Ann

    “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.”

    No there is no debtor’s prison but you may still go to jail. Once a debt collector hires an attorney who in turn goes through the courts to obtain judgement, there is a chance of being arrested. If a debtor fails to complete a financial statement sent at the time a default judgement is granted, the debtor can be served to go in front of the courts to complete the financial statement. If the debtor does not appear to the courts, then the debtor will be served with contempt of court and a body attachment or arrest warrant can then be placed on the debtor. So, technically, imprisonment is still possible. It may be a surprise to the American Public that this is going on in our court systems for credit card debts with balances of $2000.00 or less.

  • Debt

    Debt only stays in your name for 7 years. If you can avoid the debt collection process completely without them ever finding you they will strike the debt off. This is hard to achieve but I know many individuals that have got out of debt this way.

  • Mercury Collections

    Always try and negotiate down the debt, especially near the end of the calender month.