The advent of credit cards and easy terms for buying seems to have opened a Pandora's box of woes for many American households. When you consider how simple it is to buy on time (and how, in fact, we're coaxed or cajoled into doing just that), it's little wonder that some folks get themselves into financial straits that aren't all that easy to get out of. And as most of us probably already know from harsh experience, it only takes one unexpected blow (perhaps a layoff, a sickness, or an accident) to turn a strained budget into a broken one.
It's at this point, though, that the real problems begin . . . because if a creditor doesn't receive payment within the normal 30-day billing cycle, for the next 30, 60, 90 days (or more) he or she will continue to request remittance . . . while handily tacking on a stiff finance charge, to boot! Then—as if that weren't enough—should the account remain outstanding, there's a mighty good chance it'll be turned over to debt collection agencies that, as you can well imagine, will handle the matter in an entirely different fashion than would your friendly local retailer.
How Debt Collection Agencies Work
A collection agency, you see, is usually the creditor's last resort. Look at it from the "opposition" 's perspective: Since the bill will most likely become a total write-off if the matter isn't pursued, a creditor figures it's worth giving up the standard 15-50% off-the-top fee to an agency in order to secure even a portion of the debt owed.
Unfortunately, the methods by which many bill-collecting firms go about their business are something less than commendable, especially in light of the fact that the great majority of people in debt would gladly make good on their financial commitments if they were solvent.
In essence, collectors rely upon the average person's ignorance of  the law,  the credit-rating game, and  his or her rights and recourses. The agencies then compound that with intimidation, scare tactics, and guilt trips ... and come up with a working formula that's appallingly effective, particularly with those whose lives have already been disrupted by financial (and, doubtless, family) worries.
But it doesn't have to be that way! Once an honest debtor understands what a collection agency can and cannot do, it's relatively simple for him or her to deal intelligently with those fiscal ferrets . . . and to turn the tables on them and their tactics if that's what it takes to encourage them to look elsewhere for an easier target.
Empty Barrels Make the Loudest Noise
Understandably, it'd be nearly impossible to present every conceivable type of consumer debt situation and then offer a watertight solution in the space we have here. But we can spotlight some of the more common circumstances and—by removing the shroud of mystery that often seems to surround them—help the financially strapped individual to determine the best course of defensive action.
The key to comprehending the bill-collecting game is to realize that there are very few "nice guys" on the card. Remember that such individuals are making a business out of raking money off a transaction that really has nothing to do with them . . . and that the more they can squeeze from each person (and the more people they can harass successfully), the fatter the bill collectors' paychecks are going to be at the end of the month.
Bearing these facts in mind, it's not too difficult to see why the collection agents go to such lengths to extract payment. Admittedly, the days of "strong arm" physical persuasion are all but over, yet the current "mind game" tactics are almost as ruthless . . . and can be extremely effective.
For example, a collection agency's representative might have the audacity to inform the tardy bill payer (in a convincingly authoritative manner) that failure to pay up will lead to arrest or jail. Ridiculous! Debtors' prison was abolished long ago, and financial insolvency is certainly no crime. (Exceptions to this are cases of child support or alimony delinquencies, which are entirely different matters.)
More frequently, though, the budgetary buzzards dangle the "ruined credit rating" menace over their victim, warning that they'll report the derelict account history to the credit bureau and thus destroy the non-payer's invaluable credit standing nationwide. But upon scrutiny, this threat just doesn't hold water. First of all, an account that's three or four months overdue probably has already been disclosed to a local or national credit-reporting agency. Then again, let's be frank: The last thing a person with financial problems needs is extended credit! Painful as it may seem initially, relinquishing charge privileges "cold turkey" makes it a lot easier to deal with existing fiscal commitments. (And, as many folks thrown into this situation discover, credit is only a convenient luxury, not an absolute necessity.)
Debt Collection Smarts
But what if the credit threats aren't immediately effective, perhaps because there simply isn't enough cash flow to support both a family and the creditors? Well, the collection agency isn't likely to give up without a fight, no matter what the personal circumstances of the debtor, so the bloodsucking scheme proceeds.
After sending the initial dunning notices and following them up with the previously mentioned threats, the agency may get really nasty and start calling its mark at home, work, or any other place at which an agent can make contact to continue the harassment. Collection personnel may try intimidation by assigning themselves important-sounding titles or by suggesting that they're associated with some government agency. All this is intended to frighten the victim into paying the account pronto, regardless of any other commitments that may exist.
But none of these tactics has any effect if the bill collectors aren't certain they're dealing with the right person. If—as is likely—the only information they have is a name, address, and perhaps a telephone number, they'll rely on the old "try the shoe on and see if it fits" routine to establish that they have indeed struck a responsive chord in their intended target.
The solution to that situation is so obvious that it almost has no right to be effective: Just don't give the collection agency any information whatsoever! That's right! When its representatives call, they'll probably ask innocent-sounding questions like "Is this Norton Bryant Blue?" or "Do you still reside at 1075 Oak Street?" . . . and by answering such easy queries, the victim not only admits that the collection hound's facts are correct but runs the risk of being led down the garden path to answer more damaging questions that will inevitably follow.
The best procedure, then, is to answer a question with a question. Instead of replying "Yes, this is Mr. Blue", the informed target would better say "Who's calling?". "What's this call in reference to?" . . . "Could you please tell me what you wish to speak to Mr. Blue about?" . . . "We don't answer questions over the telephone" . . . or "This is just an answering service". In short, since the bill collector will try to get as much as possible out of the person at the other end of the line (current address, place of employment, bank account information), it's imperative that the caller be offered nothing, either by the target or by a member of the target's household.
The same advice, of course, applies to written requests for money or information. If' there's just no money to put toward an owed account, it's best simply to ignore such letters. (Problems that concern appropriating a limited amount of money for partial payment of delinquent bills will be covered a little further on.)
Think about it. Often a collection agency will invite the debtor's comments or explanations . . . in writing. By complying, the subject of the search automatically admits guilt, and sending along a small personal check to keep the hounds quiet is an open invitation for action leading to a possible court-ordered lien against a checking or savings account (since the correct name, address, bank account, and/or driver's license number are all being unwittingly provided).
Keeping the Wolf From the Door
In some cases, the total of the owed bills may far surpass what an individual can comfortably afford to pay on his or her salary, but at least there's something coming in. Under such circumstances (assuming that the person in debt wants to make good and is still receiving only past-due notices indicating that the account hasn't yet been turned over to a collection agency), throwing the creditors a bone can help to stay further vexation.
The process works like this: The financially strapped person first separates secured debts from unsecured ones. The difference between them is that the former is a signed agreement stating that the purchase—or a piece of collateral—can be forfeited if scheduled payment isn't made, whereas the latter is simply a debt that's been incurred without collateral (such as a professional's fee or a credit card balance).
Naturally, since the secured debts are more pressing, the payer first decides how much he or she can afford to part with on a monthly basis and then divides the number of outstanding secured debt bills into that figure . . . to come up with how much each creditor will receive, no matter what the amount due on each account. The creditors know, you see, that the longer any given account remains outstanding, the slimmer are their chances of getting paid. Therefore, even though they may argue for half or even full payment, they'll probably settle for a fraction of the total each month.
The unsecured debts aren't as urgent but should still be paid. To figure out how to handle such reparations, the debtor should follow the action outlined above—on a smaller scale—after examining family and household needs to see how much would be left over, in a pinch, to feed the unsecured debts.
Then, after having "made the rules", so to speak, all the bill payer does is type a letter to each creditor, telling —not asking—what amount will be paid and on what terms. (When dealing with creditors by mail, the bill payer can't be fast-talked into making an unwise commitment . . . besides, the Postal Service takes longer than a telephone company does to relay a message.) Creditors, by and large, usually go for such an offer, knowing it's less expensive for them to wait awhile for payment than to repossess or sue.
There is, however, another side to the coin. If a collection agency has the account, it'll want to squeeze everything possible from it ... but its representatives still aren't above haggling. To satisfy them, a smart debtor would write a woeful missive, describing all the terrible things that have happened in the few prior months, which have made it impossible to meet the payment . . . and, in closing, would offer to pay perhaps 30-50% of the face value to settle the debt for good.
And why should the collectors accept an offer like that? Because that same bill payer would be sure to mention in the letter the possibility of retaining an attorney's services for arranging bankruptcy proceedings . . . which, if carried out, could flat eliminate the agency's chance for collecting even one red cent!
Anyone going this route naturally has to take precautions ... such as  making sure that the settlement is made in writing, and signed by both parties before the "wrap-up" check is sent,  using certified mail, return receipt requested, to post the letter,  sending only a money order or cashier's check (preferably from a post office or bank not normally used by the payer) with a written statement on the back indicating whom the payment is for, whom it's from, and that it constitutes full settlement of the account in question, and  obtaining a photocopy of both sides of the money order or check.
With all these ducks in a row, it's pretty difficult for a bill payer to get burned . . . but if the agency refuses such a compromise and insists on pressing for the full amount of payment, the person in debt can only stand his or her ground, point out that it's the best offer under the circumstances, and remind the collector that bankruptcy proceedings are the only alternative, period.
Bill Payers' Rights
Let's assume, though, that a particular agency is being especially nasty (or greedy, as it may be). Perhaps its representatives have pulled out all the stops, and it seems that their harassment techniques are both varied and continuous . . . and maybe even illegal. If that's the case, the best offense is a well-prepared defense.
Both the Federal Trade Commission and the states' collection agency licensing bureaus have guidelines within which bill-collecting firms must operate. But, since most consumers aren't aware of this, some collection companies take advantage of their victims' ignorance and overstep the bounds of propriety.
Then a bill payer's most effective weapons are presence of mind and a knowledge of the law. In a nutshell, a collection agency is forbidden to do the following:
- Damage a person's reputation by making his or her debts public knowledge.
- Threaten an individual with bodily harm.
- Inform an employer—or any third party—of a person's debts or of the fact that the caller represents a collection agency, unless specifically asked.
- Use obscene language.
- Continuously harass a person to upset.
- Falsely suggest that late payment of bills is a serious and punishable crime.
- Insinuate that they represent a government or law enforcement agency, either orally or by letterhead.
- Call an individual at work if told, in writing, to cease.
- Mislead a person into believing that his or her Social Security, disability, or unemployment checks can be cut off for nonpayment of debts.
- Provoke immediate payment by threatening to charge an attorney's or service fee, to which the creditor is not lawfully entitled.
- Falsely claim to represent a law firm or use legal stationery.
By keeping a level head, a financially strapped person confronted with such tactics can turn the situation around to put bill collectors on the spot . . . specifically by reporting their actions to  the Federal Trade Commission,  the state collection agency licensing bureau, and  the collector's supervisor or employer.
Essentially, all this requires is the presentation, in a letter, of an accurate account or statement of an offending conversation or exchange of information. Obviously, if there were oral threats, the complaint would be much more effective if a voluntary witness had listened in on a telephone extension when the call was received. Such a report should make the collection agency realize that it's dealing with an informed individual, and it may move on to an easier target.
Of course, all is not a bed of roses for the person in debt. If a collection agency brings a court case against a delinquent bill payer and manages to win a judgment, the firm can attach up to 25% of his or her wages (after child support, taxes, and Social Security are deducted) or whatever's required from a savings or checking account. (Moreover, if two or more liens are taken against the debtor's salary, legally he or she can—in some states—be discharged by an employer.) In addition, automobiles and other possessions can be taken and auctioned off to settle a debt (again, with a court order).
Filing for Chapter 13 status or for bankruptcy are final defenses, but before taking those extreme actions, a debtor should seek the counsel of an attorney. All in all, though, for the majority of financial difficulties that most folks might face, just the knowledge of how collection agents operate should be a sufficient weapon to stave off their nettling. Should additional assistance be needed, however, most communities offer a cost-free legal aid or credit-counseling service that can give even those in the depths of debt some reassurances, directing them toward the light at the end of the tunnel.
EDITOR'S NOTE: For those interested in further information on dealing with debt problems, How to Turn the Tables On Bill Collectors—Quickly and Easily by Dr. Charles H. Browning covers the subject in an excellent question-and-answer format and also provides sample letters.