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Ten Things Bill Collectors Don't Want You to Know

by John Barnes
Copyright © 1994 Nolo Press

  1. The More You Pay, the More They Earn
  2. Payment Deadlines Are Phony
  3. The Don't Need a 'Financial Statement'
  4. The Threats Are Inflated
  5. You Can Stop Their Calls
  6. They Can Find Out How Much You Have in the Bank
  7. If You're Out of State, They're Out of Luck
  8. They Can't Take It All
  9. They May Not Know a Thing
  10. You Can Pay Student Loans in Installments
  11. Side Bar--How They Find You

For many people, the cold call from the bill collector is an intimidating and even humiliating experience. They are unprepared to deal with collectors, who are trained to handle every type of response. Relentlessly assertive, collectors focus on "the close" -- your commitment to pay.

The less knowledgeable you are about your rights, the more confident a collector becomes; the more worried you are, the less concerned the collector becomes. Collectors know that it's easier to manipulate a conscientious debtor into a payment plan that benefits the collector, not the debtor.

You'll be in a better position to resist collectors' pressures, and negotiate a sensible repayment plan, if you're prepared for the tactics they're likely to use. Here, then, are ten of the best-kept collection secrets.

1. The More You Pay, the More They Earn

Collectors get commissions -- usually 30 to 50% -- on money they bring in, which often double or triple their salaries. This means they have a strong incentive to press for a big "down payment" from you, even if this deepens the cycle of debt.

Collectors hoping for a big commission may claim that the boss insists on a big down payment. In fact, blaming it on a mythical manager is designed to deflect your anger away from the collector.

2. Payment Deadlines Are Phony

Payment deadlines set by collectors are meaningless. Collectors simply want to create a sense of urgency, because the longer it takes to get you to pay, the less chance there is of collecting the debt.

3. They Don't Need a 'Financial Statement'

Collectors often claim they need a "financial statement" from you, so they can work out a realistic repayment plan. You'll notice, though, that the information they ask for -- bank account numbers, references, place of employment -- is far more than they need for that purpose. They're fishing for information that will help them find you if you move or sue you if you don't repay the debt.

4. The Threats Are Inflated

Collectors always graphically detail the disastrous consequences of failing to pay a debt. "Your credit rating will be ruined," they warn. (Not mentioning that it's probably already not so good, since a collection company is after you.) "Your personal possessions, including your car, could be seized and sold at a public auction!" (Never mind that this virtually never happens; it's illegal in some states and impractical because of the expense.) Probably 95% of the time, collectors go after only bank accounts and wages.

5. You Can Stop Their Calls

You have the right, under federal law, to tell a collection agency to stop contacting you. Just do it in writing, and contacts must stop, unless they're to tell you that collection efforts have ended or the agency is going to take a specific action (like filing a lawsuit) against you.

6. They Can Find Out How Much You Have in the Bank

A collector who has your bank account and social security numbers can probably easily find out the balance of the account. Because big banks now have automated account inquiry systems, the collector doesn't even have to speak to a human being; all it takes is a phone call to the automated voice-mail service. When the account number and social security numbers are punched in, the computer promptly supplies an up-to-the-minute account balance.

7. If You're Out of State, They're Out of Luck

Collection agencies routinely call out-of-state debtors to demand payment. But if a creditor has sued you and won, you are probably safe from enforcement action if you bank and work outside the state where the lawsuit was filed. That's because to collect, the collection agency must transfer the judgment to your state, which is prohibitively time-consuming and expensive.

8. They Can't Take It All

Certain income, such as social security, pensions and 75% of your take-home pay, is exempt from enforcement action. You can file a claim of exemption from a garnishment of the other 25% of your wages if it would cause you or your family severe hardship.

9. They May Not Know a Thing

Sometimes a collection agency lawyer, trying to collect a judgment debt, sends questions on a court form asking about your income and assets. (These are called "post-judgment interrogatories" or "information subpoenas.") This is good news for you -- it means that the agency has no information and is hoping you will be intimidated enough by this legal questionnaire to complete it. Many people do, because the forms list sanctions, such as fines, for not doing so. But normally, it is too expensive and time-consuming for an agency to go to court and force compliance.

10. You Can Pay Student Loans in Installments

If you are behind on student loans, you can apply for what every collection agency hates: "reasonable and affordable payments" under the 1992 Higher Education Act. If you can document financial hardship, a collection agency must accept as little as $10 per month for at least six months. As long as you make the payments, you are eligible for Title IV Student Aid, and you can continue the payments unless your circumstances change.

Side Bar--How They Find You

It isn't hard for collection agencies to locate most debtors. Here are some of their common sources:

Credit Checks

Your credit file is a wealth of information. To see whether a credit bureau -- and therefore a collection agency -- has information on where you work and bank, request a copy from TRW, Trans Union or Equifax. (But realize that when you tell the company where to mail your report, that address will make its way into your file.)

Telephone Information

Even if your phone number is unlisted, a collector always checks the address. If you have an unusual name, the collector calls all numbers with that name, looking for a relative. A favorite technique is to leave a message with a relative, asking you to call a number collect. If you call, the collector accepts the charges -- and contacts the operator to find out the number you called from.

The Post Office

Using a post office box as your mailing address doesn't deter a collection agency. For a small fee, the post office will provide a box holder's street address if it's available.

Mailing Lists

Most consumers' addresses (and sometimes, phone numbers) have been sold to companies that collect mailing lists and sell them to collection agencies.


Collectors may call persons you listed as references on a credit application and ask for your phone number. It's against the law for the collector to lie and say it's a friend calling, so a reference may be able to stop the calls by asking directly "Are you a bill collector?" Of course, some collectors simply break the law.

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The selected articles originally appeared in the Nolo News and are Copyright © Nolo Press 1996 and reproduced here with permission. If you find them of value, we encourage you to visit Nolo Press at their web site If you wish to post them on-line or otherwise distribute them, first read Nolo's copyright policy.

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