With the economy struggling to stay afloat and unemployment higher than it has been for years, a lot of people are falling behind with paying their credit card bills. First, let me say that I would rather you fall behind with your credit cards than your electric bill. As a matter of fact we teach that you should prioritize you budget around the four walls, and only after you have taken care of necessities should you attempt to pay your debt. Notice I did not say, don’t pay your debt, I said pay necessities first and then debt. If you can wake up, take a warm shower, eat breakfast and drive to work, you are a lot more likely to win than waking up with no electricity and wondering how you are going to get to work now that your car has been repossessed. We want you to make good on your commitments but make sure you don’t sacrifice your family for an irrate collector.

Do you have any rights?

What should you do if you have gotten behind with your credit cards? First, you need to know that even though you are in debt you still have rights. Your rights as a person in debt are defined in the Fair Debt Collection Practices (FDCP) Act. Wikipedia states that the purpose of the FDCP Act is to:

eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy

The first time you are contacted by a debt collector can be a very scary moment. Your mind starts racing, you don’t think straight and often you will make bad decisions. If you find yourself in this situation first you must remain calm and in control. Listen to what is being said and determine if you are really the person that the collector is looking for. Many times, collectors found you because your name matches the name of some that has some debt. You may not even owe the debt that is being collected but unless you take control of the situation the collector will take advantage of you.

What should you do?

Within five days of being contacted, the FDCP Act requires the collector to provide you with a written notice detailing the exact amount of the debt and the name of the creditor that you owe money. A word of warning, you will have to ask for the proof that you owe the money, they won’t send it to you otherwise. Also, if you feel you don’t owe the money, they must provide information on what action you need to follow to dispute the charge. Again, they won’t want to send you this information and will very likely tell you there is no need to dispute the claim, you just need to pay it.

If you feel you are being falsely accused you need to send a letter, via certified mail, disputing the amount you supposedly owe and asking the collector to verify the actual amount and that you really owe the debt. The collector, according to the FDCP Act is then required to get verification of the debt or provide a copy of the judgment against you. If they can’t provide you with this information, simply ask them not to contact you again until they can provide the information.

Whatever you do, don’t allow the collector to feel like you are a pushover. You must remain in control and above all do not let the collector guilt you into doing something that you will regret. If you do owe the debt you may be able to set up some sort of settlement with them depending on how much you owe and how long it has been since you made a payment. If you do make a deal with a collector, do not send the payment until you have received a written agreement of the details of the deal. If you cannot provide proof of the deal, it is very likely the deal will not be honored.

One of the more embarrassing and frightening things that can happen to someone in the area of personal finance is to be contacted by a debt collector. During this time of economic uncertainty, more and more people are finding themselves faced with this situation. With rising food and utility prices, often times the additional income that used to be used to pay off debt, is now being used to help meet the basic necessities of the family. The one thing that will not help your situation if you find yourself dealing with collectors is to ignore the situation; doing nothing will cause the situation to deteriorate very quickly.

According to an article by CNNMoney.com, in 2007, more than 5500 collection agencies made more than 1 billion contacts with consumers. The debt collection business has grown dramatically as consumer debt has reached $2.9 trillion. With this enormous amount of debt, new collection agencies are popping up everywhere. Technology advancements have helped collectors reach more people in less time and that causes increased pressure on those that have fallen behind in making monthly payments. According to CNNMoney.com:

As the economy turns further south, cash-strapped consumers let debt repayment fall by the wayside and collectors have to work harder to collect on it – and are using more advanced ways to do it.

Because of the increased number of people that are dealing with debt repayment, the opportunity for scam artists has also increased. Knowing what is and isn’t allowed will help determine if the person calling you, is a real collector and what they can and cannot do to collect on your debt. The Federal Government passed the Fair Debt Collection Practices Act that outlines the process that collectors must follow when working with you to settle the debt you owe. Here are just a few of the more important things for you to understand:

• Within the first five days of receiving your account, collection agencies are required by law to contact you and “verify the debt” — provide documents that prove the debt belongs to you.
  If a customer requests verification, a debt collector cannot continue to try to collect until verification is provided.
• Collectors are only allowed to contact a consumer at home between the hours of 8 a.m. and 9 p.m. in the time zone of the consumer, not the collector.
• A collector cannot contact you at work, but they can legally contact your current employer to verify that you work for the company. They cannot ask for your work phone number, supervisor’s name, dates of employment or other information.
• If, after a prescribed amount of time, a collector is unable to contact you, they can employ other tactics including Internet searches, Lexis-Nexis searches and credit bureau file look-ups. They then can contact friends, relatives and neighbors in the attempt to get in touch with you.
• The collector is not allowed to disclose anything about the debt to your associates, family or friends unless you have authorized it in writing. They may however, ask for a few digits of a social security number or an address to try and verify that you are the debt holder.

There is one last thing you need to understand when working to settle your debt. A collector would prefer to get a lump sum payment of the entire debt (and will use a lot of pressure to get you to send the payment), but most of the time they will work with you and either set up monthly payments or settle for a fraction of the total debt, if you agree to send the payment immediately. If you do work a deal with the collector, do not send any sort of payment until you have the terms of the agreement in writing and do not give the collector electronic access to your bank account. Send them a cashier’s check, via registered mail and keep your receipt and the returned receipt indicating the collector received your payment. You should keep a copy of all written documentation in a file just in case a question arises following the completion of the agreement.