What To Say to Creditors While You Are in A Debt Settlement Program

If you are facing financial hardship, it is important for you to understand how to communicate with your creditors or debt collectors while you are in a debt settlement program.

If you are enrolled in a debt settlement program, you must know how a debt settlement program works. During the program, you voluntarily will agree to stop making payments to the debt enrolled and to stop using your enrolled credit cards. Instead, you will be making more manageable deposits in an escrow account that you control while settlements are made with each enrolled creditor on your behalf. During this period of time, creditors or debt collectors will try to contact you.

You have probably decided to enroll in a debt settlement program because you cannot afford to pay your credit card minimum payments, or you are already behind on payments with your creditors. In both scenarios, depending on your situation, creditors or debt collectors will try to contact you nonstop to find out why you cannot meet your payment obligations.

WHAT IS THE DIFFERENCE BETWEEN A CREDITOR AND A DEBT COLLECTOR?

It is important to know that the Fair Debt Collection Practices Act (FDCPA) protects debtors from deceptive, abusive, and unfair collection practices.

Section 803(6) of the FDCPA, https://www.ftc.gov/legal-library/browse/rules/fair-debt-collection-practices-act-text#803, defines a “debt collector” as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another”. In other words, a debt collector is a third party engaged in attempting to collect a debt owed to a different party such as debt collection agencies, collection attorneys, or debt buyers. In addition, a “creditor” is the party or entity that extended you the credit in the first place. For example, your credit card company.

Although the FDCPA imposes certain rights and remedies against those who violate its legal provisions, the FDCPA does not usually apply to creditors. However, if Creditors, when collecting their own debts, use a different name to suggest that a third party is collecting said debt, those creditors will be subject to the FDCPA.

Even if the FDCPA may not apply to creditors, Section 5 of the Federal Trade Commission Act (“FTC”) makes illegal to use deceptive or unfair practices when creditors engage in the process of collecting debts. Thus, debtors have broader protections because the FTC’s prohibition applies to all creditors and debt collectors, including banks.

For more information visit https://files.consumerfinance.gov/f/documents/102012_cfpb_fair-debt-collections-practices-act-fdcpa_procedures.pdf

WHAT ARE MY OPTIONS WHEN DEALING WITH CREDITORS OR DEBT COLLECTORS?

Once you are aware of the above difference, you have three different options when dealing with creditors or collectors. The first (1) option is to send a written Notice to your creditors to stop any further contact with you. The second option (2) is to briefly talk with your creditor to explain your circumstances. In this case, you could tell that payment will be made as soon as you are able to make one but right now you are experiencing financial difficulties. And the third (3) option is to avoid answering the phone when you do not recognize the caller ID.

Remember that when talking with creditors, you must be prepared to answer why you cannot pay your debt, your current income, and how you plan to be up to date with your debt. This situation could be embarrassing for you, and you would prefer to do the third option and ignore the phone when is ringing.

Attorney Mathew Higbee, who has a lot of years of experience helping people with financial burdens advises that “It is important to know that stopping communications with creditors or debt collectors does not eliminate your debt. They still can collect from you even if they cannot contact you. They may find alternatives to collect from you, for example, start legal action against you, attempt to garnish your wages, or report negative information to the credit company, although that will not always happen”.

Being unable to pay your bills may result in collection calls, penalty fees, and legal action. Also, if a debt collector violates the FDCPA when trying to collect a debt from you, your attorney will help you to explain what options you have and if you are entitled to recover money for damages.

Also, Attorney Mathew Higbee, points out that “you must know how to identify debt collector’s abusive practices, how to spot a fake debt collector to obtain your personal information and how to know if your debt is yours. You must keep a good record of your communications because there are laws that protect you from abusive collectors”. Please do not hesitate to contact us if you feel that creditors or debt collectors may be harassing you or using deceptive language.

If you are enrolled in our debt relief program, the good news is that you have legal representation. In this case, you want to tell creditors and collectors that you are represented by an attorney, and they must stop contacting you directly.