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Tips to negotiate with collection agencies for settling debts

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By: tiarajoseph11
on 10th Feb,2016

8 tips to ease up your way while negotiating with a collection agency for settling your debts.

A debt collector may allow you to pay a smaller amount than the total debt you owe. Although, settling your debts will have a negative impact on your credit score. If you negotiate with the collection agent, that means you are unknowingly agrees that you can pay as much as possible for you. Your credit report will reveal that no outstanding debts are there anymore.

So, what should you do to have a good negotiation with the collection agency? Let’s find out below:

Step 1

Offer them a percentage of the debt amount you owe. In return, ask them to delete the negative listing from the credit reports filed with the three major credit bureaus. You should make the offer in writing. Collection agencies normally buy debts from the original creditor, and the former creditor will be out of the picture once the debt is transferred. The debt used to be sold to the collection agency to receive tax benefits under federal law. If you anyhow want to contact the original creditor, the creditor or his representative will not talk to you, or they’ll suggest you to communicate with the agency.

Step 2

You can start the offer at 25% or less than the total debt amount. The collection agency will get a profit at 25%. For example, if your debt is $2,000, and the collection agency has given about $140 for the total debt, you can offer 25%, or $500. The collection agency will get a profit of $360 straight.

Step 3

Don’t talk to the collection agency over the phone. Rather, keep all communications limited to letters, which must be sent by certified mail, to create a paper trail. You can also use e-mails to send document copies.

Read more: 4 Simple guidelines to deal with debt collectors

Step 4

You must ask the agency to validate your debt. You must make it sure that the agency must show you the limits of the Fair Credit Reporting Act, which proves you owe them. Collection agencies must validate any debt they attempt to collect as per FCRA rules.

Step 5

Inform the agency by a clearly written letter that you wish to settle the account as soon as possible, rather than filing an expensive lawsuit. Remind the agency about the percentage you have offered. You can negotiate again, make sure you start the negotiations with the lowest number possible. You can increase your offer at any point in time, but cap your offer at 50%.

Step 6

Mail the letters and keep a copy for yourself. Make sure you use a certified mail service to send any letters. Don’t accept any follow-up counter-offer through the phone from them. After getting the signed letter from them that your offer is accepted, submit a cashier’s check or money order to them. Don’t forget to follow up with the collection agency if it doesn't change the account status on your credit report. Provide copies of your settlement letter, mail receipts, and other documents and keep pushing the collections agency to end the deal as soon as possible to avoid a lawsuit.

Step 7

Review your budget before offering too much. When you can determine your affordability, start your negotiations. When you’re negotiating with a collector, make sure you’re not revealing bank account numbers, place of employment, or any references.

Step 8

Collect the details of the agreement in writing before you pay off the collection agent any money. It's also a wise decision if you can hire a consumer law attorney, he can properly review the agreement. Your agreement must clearly cover the below-given points:

  • How much amount you have decided to pay.
  • Whether you will pay the settlement amount in installments or in a lump sum.
  • What will be the due date of every payment?
  • What will be the mode of payment(s), such as - electronic bank transfer or a cashier's check?
  • The debt collection agency must report to the credit bureaus that your debt has been "paid in full", as soon as the agency receives the settlement amount.
  • Any concessions from the debt collection agency.
  • Conditions that’ll breach the agreement and the outcome of the breach.

If you aren’t confident enough to negotiate your debt settlement agreement, hire a consumer law attorney to do it for you. Make the collection agency realize the consequences of filing bankruptcy. It’ll motivate the agency to settle your unsecured debt for less than what you owe.

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