How to Deal with Debt Collectors

Photo to accompany story about how to deal with debt collectors. Getty Images
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Before the COVID-economy, 68 million people had debt in collections on their credit report. According to the Urban Institute, that number is expected to increase as people find they cannot meet their financial obligations in light of pandemic-related job losses and record-high unemployment numbers. 

With more than 17.8 million people unemployed, it’s little wonder bills go unpaid. Debt can enter collections and be reported to credit bureaus when it becomes more than 180 days past due. 

So, how do you deal with debt collectors when you can’t pay your bills? 

Debt Collection Definition

Debt collection is the collection of funds owed for goods and services. The debt collector’s role, also called debt buyer, is to pursue and collect on past-due bills. Most often, the originator of the loan will contact you regarding missed payments. If they are unsuccessful, they will turn over your account to a collection agency. 

Debt collection agencies are in the business to make a profit. There are two ways a debt collection agency makes money. One is they have an agreement with the creditor in which they will be paid a fee if they recover the money owed. Another way is the debt collection agency purchases the debted account from the lender. The account is sold for less than the balance owed. The agency takes over attempts to collect the debt and keeps the difference if they collect. 

Methods Used By Debt Collectors 

Debt collectors get your information in many ways. Here are a few ways they track you down. 

Credit application

The lender or creditor who originated your loan has all of your contact information. If you’re behind in payments, they can share your details with debt collectors. 

Online phone books

Printed directories or digital phone books from online sites are good resources for names, addresses, and phone numbers. Once a collection agency finds your phone number, they may find your address using a reverse directory. 

Contacting people you know

Collection agencies may call friends, relatives, or employers to find out information about you.

Social media

Debt collectors make use of the information you’ve chosen to share on social media sites. They might use this method to access your information, such as your email and phone number. 

How to Deal with Debt Collectors

If a debt collector comes calling, it’s important to know your rights before you engage with the debt collector, make any payment, or give any personal information.

1. Verify the validity of the agency

Make sure the call is from an actual debt collector. There are scammers who claim to be employed by a collection agency but only wish to access your personal information. Ways to validate:

  • Before disclosing anything personal or making a payment, ask for their company name, caller name, company address, phone number, and professional license number. 
  • Google and read reviews for complaints about company legitimacy. 
  • Call your creditor to learn what agencies they authorize to collect debt on their behalf. 
  • Check your credit report. It will show if an account was submitted for collection. This can help you determine the validity of the debt caller and also clarify what the debt is.  
  • Check the Nationwide Multistate Licensing System database.

2. Get It in Writing

Never give your personal information, bank account, or credit card information until you verified the debt and see it in writing. You have the right to refuse conversations about the debt until you receive a written “validation notice.” Collection agencies are required by law to send you a validation letter within five days of your inquiry. They must state the name of the creditor, the amount, and how the dispute process works. 

3. Negotiate

It’s not uncommon for debt collectors to settle an unpaid debt for pennies on the dollar. For this reason, you have bargaining power. Figure out how much you can comfortably pay if they require a one-time lump sum or monthly payments. Be prepared to negotiate and  get the offer in writing. 

4. Dispute the debt

If you feel the debt collector has contacted you by mistake and you don’t think you owe the debt, dispute it. When you get a validation letter, you have 30 days to respond as to why you feel the claim was made in error. If you dispute the debt, the collection agency must report the dispute to credit bureaus. 

Your Debt Collection Rights

The Fair Debt Collection Practices Act (FDCPA) imposes strict limitations on what debt collectors can do or say when collecting a debt.  

It’s important to make sure you’re dealing with a legitimate collection agency, but real ones exist. It’s essential to understand your rights when dealing with a debt collector, says Timothy E. Hansen, founder, and CEO of Wealth Growth Wisdom, a personal finance site.  “Reputable debt collectors are supposed to follow the laws, including consumer protection laws.”

Pro Tip

Never give your personal information, bank account, or credit card information until you verify the debt and see it in writing.

Here we outlined your rights and rules debt collectors must follow:

Harassment-free rights

“When contacting you, they’re supposed to be fair, respectful, and honest,” says Hansen. But, some debt collectors use high-pressure tactics to intimidate you into paying at first contact. You are protected by the FDCPA, which means debt collectors cannot use harassment to collect a debt.

Here are some examples of harassment from a debt collector:

  • Obscene or abusive language.
  • Violet threats.
  • Intentionally excessive repetitive phone calls.
  • Publicly listing your name and debt. This does not include reporting to credit bureaus. 
  • Refusing to disclose their name or company. 

Contact Restrictions

Debt collectors cannot contact you before 8 a.m. or after 9 p.m. or use robocalls to your cell phone.


The FDCPA advises debt collection companies not to use deceptive, false, or misleading techniques. 

Examples include:

  • Falsely stating the amount owed.
  • Falsely representing themselves as an attorney.
  • Falsely threatening to have your arrested.
  • Any legal misrepresentation.

File a complaint

If you feel you’re being harassed by a debt collector, you can file a complaint with the CFPB or your state’s attorney general’s office. 

Get legal help

If a collection agency is harassing you, your family and friends, or employer, or decide to sue you, reach out to an attorney or the legal aid society in your local area. If a debt collector violates your rights under the FDCPA, you have the legal right to fight back. 

Document and log your communications

“Since debt collection is a complex issue to discuss, it is best to record the call and keep logs of the conversation. This helps avoid misinformation and inconsistencies, as well as keep your information safe,” says Timo Wilson, CEO of ASAP Credit Solutions, a credit restoration company in Phoenix, AZ.  

Beware of Scams

One of the top consumer complaints to the Federal Trade Commission (FTC) is debt collection scams.  Here’s how to spot some of the common pitfalls used by debt collection scams, so you don’t fall prey.

  • You get a call from a debt collector threatening to have you arrested if you don’t make a substantial payment on the spot.
  • The debt collector asks you to pay on a prepaid debit card or wire transfer.
  • The assumed debt collector or a legitimate-sounding attorney won’t provide a call-back number for verification.
  • The caller gets overly angry or threatening.
  • The caller won’t tell you the creditor or the amount of the debt.
  • You can’t find the name of the assumed debt collection agency by doing a web search, or you find the fictitious company has many complaints filed by other consumers. 
  • You get a call from a bogus auto loan company promising to reduce your monthly car payments to avoid repossession. 

Preventing Debt Collections

If you are experiencing financial turmoil and find yourself with past-due accounts, you can put strategies in place before your accounts go into collection. 

Credit Counseling

Credit counseling organizations employ trained and certified credit counselors to help you set-up a personalized money management plan. They also help you create a budget, advise you on money matters, offer workshops and educational materials, and organize a plan to pay down your unpaid debt.  Credit counseling firms are either free or low-cost. So call and find out if they charge a fee and exactly how much before making an appointment.  

Debt Consolidation Plan

Debt consolidation plans allow you to combine all existing debts into one loan at a lower interest rate. Much like a personal loan, you repay the loan in monthly payments over a predetermined period of time. A debt consolidation plan is typically only for unsecured debt like credit cards and personal loans. That said, student loans are not eligible. 

Personal Loan

Personal loans are unsecured loans written by banks, credit unions, and online lenders. They can be used for almost any purpose and are paid back – with interest – over a predetermined time period, usually two to seven years. Interest rates and terms vary and are typically based on credit score, credit history, and employment status.

Student Loan Forbearance

If you’re not able to pay your student loans, the CARES Act provides a temporary 0% interest rate on loans owned by the Department of Education and the temporary suspension of all loan payments. Both are scheduled to expire in September 2020. However, Congress may extend this deadline.

Mortgage Forbearance Options

Thanks to the CARES Act, homeowners who aren’t able to make their mortgages payments due to the coronavirus crisis may be able to take advantage of up to 12 months (360 days) of mortgage forbearance. This is only for borrowers whose mortgage is federally owned and backed through mortgage giants like Fannie Mae and Freddie Mac, but may also offer mortgage relief options based on the state of residence.  

Communicate with Your Creditors

If you find yourself struggling to meet payments, communicating frequently with your lender, bank, or credit union can make all the difference. Many lenders may temporarily lower your payment amount or interest rate. They may even pause payments or place your loans in deferment or forbearance.  Showing you are impacted financially by COVID and unable to make payments will help keep your account in good standing and out of collection.