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4 mistakes to avoid when negotiating debt with collectors

4 mistakes to avoid when negotiating debt with collectors

By: Diana Bocco | May 12, 2020

When negotiating debt with collectors, knowing what you shouldn’t do can save you a lot of headaches. If your debt has been passed to a debt collection agency, sometimes paying it off is the easiest way out. But if the debt is more than you can afford, trying to negotiate a settlement can be a lifesaver.

Before you start the process of paying off the debt, however, here are some of the biggest mistakes to avoid when negotiating debt with collectors.

1. Sharing too much personal information

Debt collectors have a right to call you to request payment of the debt. However, if a debt collector asks for your personal information and you don’t feel comfortable sharing it over the phone or you feel the request is suspicious, simply say no. For example, a debt collector can ask you to confirm your name but there’s no reason for them to ask for your bank information.

You should also not volunteer corrections when negotiating with debt collectors. If the person calling mentions an address you’ve never lived at, don’t correct them. The more information you provide, the harder it will be to dispute a debt later on, should you need to.

If you’re suspicious that the company calling might not be legitimate or if  they are asking for too many details, tell them to contact you in writing instead.

2. Not confirming in advance that the debt is valid

Before you do anything else, you need to confirm that the debt collection agency is legitimate and that the debt is actually yours. Ask the caller for the debt collection company’s name, phone number, and address. If anything seems suspicious or feels like a potential scam, tell them to call you back later. You can then spend some time Googling them.

Always ask for details when negotiating debt with collectors. Who’s the original creditor? What’s the original debt amount? Then spend some time going through your records to make sure you really owe that money.

According to the StepChange Debt Charity, a creditor has six years to recover a debt before it becomes ‘unenforceable’. This applies to most debt, including credit cards, payday loans, and utilities arrears. Mortgage shortfalls and tax debts to HM Revenue & Customs are exceptions, with longer limitations period or no expiration at all.

If you believe your debt is old and might have expired, don’t pay anything. Once you pay, you acknowledge the debt is yours and might have to continue paying.

3. Not having an offer ready in advance

If you get a legitimate call from a debt collection agency, don’t agree to pay the entire amount. When negotiating debt with collectors, it always makes sense to offer a lump sum settlement if you can afford to. For example, if you owe £1000, you might be able to pay £500-£800 to close the debt. It all depends on what the company is willing to settle for.

To get the best possible result, you need to have a number in mind to give them. If the call catches you by surprise, tell them you’ll think about it and ask them to call you back. If you want to settle, you’ll have to pay the agreed amount in one go. You won’t be able to use a payment plan. So have an amount in mind that you can afford to pay right away. Once the offer is accepted, you usually only have a small window to pay the agreed-upon amount.

4. Paying before you have an agreement in writing

Once you’ve finished negotiating with debt collectors over the phone, get the agreement confirmed in writing. This is especially important if you are going to pay a settlement amount.

Never pay with a credit card over the phone during the initial negotiation call. At this point, you’ll have no offer in writing in front of you. If you pay over the phone, you will have no proof of the offer and no proof that the debt was completely satisfied.

Insist on a letter stating the original price of the debt, the discounted amount and wording that indicates the debt will be settled and closed if you pay that amount. Keep the letter for your records even after you’ve paid the amount.