Never, ever deal with a debt collector. Don’t even talk to them!

The New York Times magazine recently wrote about the ever growing shady world of debt collections, and the picture is ugly.  These scavengers buy lists of people with old debt for pennies on the dollar; do whatever they can to collect from the debtors – including making illegal threats of law suits and arrest – and sell the debt on to the next guy, usually not bothering to report the payments to the credit rating agencies.   Sending these debt collectors money is not much better than burning it.

The New York Times reports, that banks and other creditors generally write off debts older than 180 days, and sell them off for an average of 4.5 cents on the dollar.  From 2006 to 2009 this resulted in  the sale of 90 million debtors’ names with unpaid debt worth $140 billion.

The Times interviewed debt collectors.  What they found out makes it clear that the best thing you can do is ignore them.  Do NOT let them bully you into paying.  If you want to pay off your debt, deal with the original creditor.

The Times also learned the best way to get the debt collectors off your back:  Hang up when they call.  One debt collector had a coding system for the people he called, which he used to decide whether or not to call them back.  The lowest rank was given to those who hung up on him.  They were unlikely to get called back.

Next were people who called back when a message was left.  Above that was someone who had promised to pay.  And best of all were people who had made a payment and promised to make more, but stopped.  All of these people were likely to get called again and again.

It is clear that the best thing you can do is to hang up.  DO NOT deal with them.  Do not talk to them.  Hang up.

Some facts to remember:

  •  If you pay off your debt to a debt collector it is unlikely to make any difference at the credit reporting agencies.
  •  Old debt disappears from your credit record in seven years.
  •  It is illegal to threaten you with arrest.  It is illegal to threaten you with lawyers if they do not intend to take you to court.
  •  Every state has a different statute of limitations on debt, but it could be as little as three years. When it is up the courts will not enforce debt collection efforts.  Any threat to take you to court is a lie.
  •  In order to collect a debt, a debt collector is obliged to provide detailed evidence of the original debt, such as signed contracts. But they almost never have that information.
  •  The only thing that debt collectors have going for them is the fact that Americans who do not pay their debts feel guilty, or are worried about ruining their credit.

The truth is that paying your debt to a debt collector is unlikely to affect your credit rating, and the money will not end up in the hands of the company that loaned it to you.   It does you no good.

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