Welcome to Coping with Collectors, a companion web log to the book "Fight Back Against Unfair Debt Collection Practices." This blog is independent of collection attorneys, debt consolidators, debt counselors and other companies. Although these services can be helpful and necessary, I believe it is also necessary to have information sources that are not backed by commercial interests.
The reason for this blog, and for the book, is an explosion of complaints about collectors. Based on my reporting, I believe the complaints indicate a surge in unfair, threatening and misleading practices -- and my short but eye-opening experience as a collector reinforced that belief.
In this economy, consumers are defaulting on debt in record numbers. Bankruptcy reform has closed off the option of erasing debts for many people, leaving them to deal with collectors.
People should pay their legitimate debts, and they should avoid getting in over their heads. But when they can't pay bills on time, they don't deserve to be threatened or harassed by telephone bullies.
In the coming weeks this space will address topics such as identifying a collection agency, stopping collection calls, negotiating a debt settlement and deflecting harassment. Links to basic information can be found under the Resources section. We will build on that, discussing how collection rules and consumer rights play out in the real world. Down the road we'll explore how to read and understand a credit report -- a major tool used by debt collectors -- and how to recognize and document illegal acts.
We'll also watch how new financial regulations affect the collection arena. Will cell phones continue to be fair game for collectors? Will penalties for violations finally be raised from their 1977 levels? And what about the debt market -- will people's account information continue to be passed around freely?
To get the discussion going, here is a look some common collection terms. The jargon of the industry provides a window on the collection process:
-- Payment in full, or PIF: A collector's first order of business is to demand this amount, the full balance showing on your account.
-- Settlement in Full, SIF: A fraction of the full balance that has been agreed upon that will erase the debt, if paid immediately.
-- Monthly payment arrangement, MPA: An agreement whereby the balance is broken down into period payments that meet the debtor's budget.
-- Paper: Unpaid debts, and the account information associated with them. "Fresh paper" refers to debts that have recently come into collection.
-- Charged-off: A debt that the creditor has written off as uncollectible. However, that does not mean that collection attempts have stopped. Most collection agencies work charged-off debts.
-- Out of stat: Debts that have legally expired under state law. This means that the creditor can no longer sue for recovery, but collection attempts can continue.
-- Fee: In collections, fee refers to the commission revenue that the agency makes on a given account. For example, an account with a commission rate of 25 percent will generate 25 cents in fee for each dollar collected. Individual collectors are rated and rewarded based on the amount of fee they generate.