Monday, January 21, 2008

Arming yourself: Take a page from the credit collectors book

Any heavily indebted situation comes with the rather ugly baggage of dealing with credit collectors. While it's always best to pay everything off immediately and in full there are times when life simply doesn't work that way. You don't always have unlimited money at your disposal. It's quite possible that occasionally in your journey out of debt you'll hit a snag and find yourself out of ammo early in the month and find yourself forced to miss a payment or two.

Whether it's because you were sick the previous week and missed work, or you had to buy a new water heater the end product is the same. You missing a payment and someone noticing. If you ever find yourself depressed, thinking no one cares, try missing two payments to American Express. You'll quickly find they're very "concerned."

The day after your missed payment was due certain mechanisms begin to go to work in the background. While they vary slightly from corporation to corporation, they essentially boil down to:

  • Grace period: Creditors know the mail isn't perfect. So they'll likely stay quiet the first couple of days after your missed payment, hoping that it's just unprocessed or will arrive shortly.

  • Internal Investigation: Your account is flagged in a computer as being late. An auditor will review your file at a glance and determines whether or not it's worth sending you to collections. If you've been a loyal client in terms of making your payments on time, they'll likely extend your grace period. If you are consistently late or regularly blow off payments all together, you'll be moved to the next step immediately.

  • Internal Collections: Your account is referred to employees within the company who specialize in collections. These people may be altogether unsavory folks, or polite representatives. They're likely of the same nationality as you (i.e. you haven't been referred to an outsourced person, yet). Most of the time they're just giving you a courtesy call, reminding you that payment was due.

  • External Collections: This is where most people begin getting worried and angry, where the stress builds up. If you miss several payments, your creditor may hire a third party vendor to collect your owed money. While you still owe your creditor the money, they don't want to waste their time and energy on you any longer. These are the folk hired by your creditors to get the money train moving again.

    I've found that it's nigh impossible to find a third party collector that isn't almost entirely outsourced. The vast majority seem to employ vast quantities of Indians. But some employ nationalities you wouldn't think would be good outsourcing candidates. Like Ireland, Mexico, and Canada.

    Which is not to say that Indians and the Irish are bad people, but occasionally the vendor will invest in bad quality land lines and speak with an accent. This makes the process very difficult.

  • Selling of your debt / Litigation: The last step. It goes no further than this. This is where your creditor writes you off as a total deadbeat. Depending on the amount you owe they'll do one of two things.

    The most likely is selling your debt to another corporation. They'll essentially sell your payment to another corporation for a part of your amount due. So if you owe $2,000, the other creditor will buy the right to collect that sum in full for something like $1,000.

    The second (and more painful) option at your creditors disposal is the litigation process. If you owe a lot, they may be within their rights to hire a semi local lawyer to drag you to court. Your original creditor still handles your account, but they really want their money. Enough to hire a $200 an hour lawyer. It's more of a scare tactic than anything, but there's a very real danger of being taken to court. As it marks your last chance to resolve the issue, this is where you should play along if you've let it get this far.
Whether it's internal, external or selling of your debt the people you speak with on the phone are going to use some specific pieces of language to obtain what they want. Their goal is to make you trust them so you'll get the money moving again. Or if that doesn't work, intimidate the hell out of you so you're too terrified of what might happen to keep withholding payments.

If you owe money, your best option, under every circumstance is to pay it back. No matter what step in the process you're in. It doesn't matter. Even if they're the minimums. Even if it's less than the minimums.

Do whatever you can that you can handle. Why? Because if you ever do make it to the litigation process the judge will see that you're at least making an effort. He'll be a lot more partial to your situation if he sees you can't pay it all, instead of you just not wanting to pay.

As such, all my advice below this point assume you're doing just that. These are some favorite tactics I've picked up in my journeys. They don't represent a full list, but rather the most obvious and common.

  • "Oh, believe me [obvious statement]" "Oh, trust me, [obvious statement]": This is the most transparent ploy it's almost laughable. This is where they attempt to build a rapport with you by showing you that yes, indeed, they are an intelligent and trust worthy person. Because they know stuff! But in my experience it just fails and makes them look like amature con-men. Why? Because the facts are so obvious.

    They'll use lines like "Oh, believe me. I don't want your money for myself. I'm just doing my job." Or "Oh, trust me. This is your best option is to pay this debt."

    You know these things. They're hoping that you'll draw a mental connection between obvious, self evident facts and your designated representative.

    How do you turn the tables? Use the same language back. Tell them "Oh, believe me. I want to pay this debt off in full. Trust me, I really appreciate your efforts."

    When you do this you're essentially telling them that you can't bullshit a bullshitter. Pardon my language, but I think that's the most appropriate term.

  • "You've made a commitment to [statement]": Whether it's "to pay this in full" or "that you'd]send payment by x day" the end result is the same. They're reminding you made a legal obligation or a personal promise that you've now broken, or are on the verge of breaking.

    Which is all well and good. But chances are if you're doing the best you can manage, that's the best you can manage. Remind them that yes, you apologize, but occasionally unexpected things come up. That you're doing the best you can possibly do given the circumstances.

  • "Well, I did you this favor by [fact]": They're trying to tap into your underlying morality here. They're essentially saying that since they were gracious and good enough to cut you a little slack, that you should make up for it by doing whatever little thing they want you to do.

    A prime recent example is my American Express Green Card. Amex has forwarded my account to a third party collector. I still owe American Express the money, but they're paying a corporation with a generic name and Indian staffers to get me moving faster on payments.

    Which is impossible, because if I was capable of moving faster I would be. But that's besides the point.

    They somehow got a hold of my cell phone number. I use it heavily for work and I don't need a collector harassing me on the go, so I told them (not ask) not to call my cell phone (as they frequently were doing). It is everyone's right to refuse to be contacted via any telephone number. I informed them that they may only contact me by mail or by my home telephone.

    They apparently considered this a "favor" on their part. It wasn't. It was a legal obligation. Chances are if they've done you a "favor," it's something they're legally required to do. Treat it as such.

  • "What do you want to do, then?": This is often used when the telephone conversation is nearing its end. It's a simple question. But a lot of people I've talked to always find it a difficult one to answer. I don't, simply because of the fact that I've planned my financial recovery extensively. I know what I want to do. Most often than not it involves staying the course.

    Answer honestly, but above all else never say "I don't know." You're putting yourself at a disadvantage. You're showing them that you're weak and can be potentially manipulated. If you really don't know what the best solution is, simply say "I need to talk to my significant other before making any financial obligations." Or "I need to consult my checkbook and budget." Because at that point you do.

    If you need to put the ball back into their court. If they're unhappy with your answers, ask them "Well, what would you like me to do?" If their answers are reasonable (and not the obvious "Pay this amount back in full, right now over the phone"), take it under consideration.

  • Using the opposite sex: I'm often a very laid back, well composed guy. It takes a bit to make me lose my cool. But this genetic named, Indian staffed corporation employed by American Express always has difficulties with me. I'm always fairly polite, but I don't move an inch unless the missus and I have had a chance to discuss the issue jointly and their proposed action benefits us in some way. I'm a stubborn rock when it comes to that.

    Why? Because they're pushy and arrogant. Because they call on the cusp of illegality. Because they brazenly try to force the missus into decisions without consulting our budget or me. Telling her that "it's best we handle this right now without any further delay."

    It's not even my card. They were so difficult to deal with she had to essentially make me power of attorney so I could take that stress away from her. And the worst part of it all? We're paying above our monthly minimums consistently and on time. And they're aware of this.

    Because of my difficult relationship with them I am contacted without fail by females. These women all have Indian accents and cookie cutter, Americanized names like "Sarah Jones" and "Jane Smith" and "Sue Jones." Apparently it's a very common surname in India, Jones. Who'd of thought it?

    And the missus? All calls for her are from "John Smith" and "Peter Johnson" and "John Williams." I'm not sure what they're looking to accomplish. Maybe they feel I'll be more likely to "compromise" if I'm speaking with a woman. At the least less likely to tell her to screw off and stop harassing me because I'm doing nothing wrong.

    How to combat it? Simply be aware of the fact that's what's happening. Monitor your responses and make sure they're not altered because of a sultry/strong voice.

  • Over the phone checks: I'll often get asked to "secure payment" over the phone. I'm regularly assured that they'll be electronic checks post dated to whatever day I'd like. Problem is, I'm not comfortable giving out my checking information over the phone to a company who has in the past been pushy and manipulative. Go figure.

    How to combat it if you're not comfortable either? If your amount due hasn't been sold to a third party simply ask them "So, if I sent my payment in full to [insert creditor] they'd shred the check?" They'll answer with "No, of course not." followed by a long winded rhetoric about how you're valued and respected. What they're looking to do is gather some information that they can give your creditor so they can get paid.

    So pay your creditor as much as you can, on time and directly. Whether this is over the phone with their official 1-800 number, online, or through paper checks it doesn't matter. Eventually they'll get the idea that their affiliate isn't doing anything and they'll instruct them to cease the harassment
No matter the amount, the type of debt owed, or the nature of the collector always keep in mind that each and every response, question and statement you make is being recorded and flagged appropriately. So be polite while retaining some strength and remain if only a little unaccommodating. So long as you're firm and intelligent in your dealings with credit collectors, you won't have to worry about them for very long.



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