How to Outsmart a Debt Collector

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Bob Brooks is a 17-year veteran in the financial services and investment industry, the author of a new book about avoiding credit and debt traps, and a radio show host who counsels callers about financial issues “from a Christian perspective.” One of his messages: When a debt collector is harassing you, it’s not the time to turn the other cheek.

Brooks is the host of The Prudent Money Show, a radio program based in Texas, and the author of a new book called Deceptive Money: A step-by-step guide to take your life back from the credit trap.

I recently picked Brooks’ brain about a number of topics. In regards to new credit card legislation, he’s not impressed:

“It’s been interesting to watch. The financial services industry is such a huge contributor to political campaigns, and Congress has really does as much as it can to protect that industry. They’ve turned their backs to a lot of the consumer abuses through the years.”

What about reforms and new levels of consumer protection we’ve heard so much about?

“It’s really nothing more than sound bites… Most of the laws written in this credit card act apply to fixed rates. And so what have the credit card companies done over the last nine months? They’ve changed all their fixed rate contracts to variable rate contracts. There’s not a whole lot of protection in this plan.”

Later in my talk with Brooks, we discussed debt collection, a process that’s confusing and intimidating to consumers who feel trapped by a debt they may or may not owe.

“People react to a debt collector much like they react to the I.R.S., and in reality, debt collectors don’t have that much power over you, and that’s what people need to realize,” says Brooks. “They also need to realize there’s a set of laws out there to protect them.”

Obviously, it’s always best to settle a debt and pay off what you owe. But sometimes, there are situations when it’s not clear what to do, like when a debt collector calls and the debt belongs to your ex-spouse; when the debt is old enough to be out of the statute of limitations for filing a lawsuit; or when the debt is not yours for whatever reason—mistaken identity, perhaps, in which a debt collector has gotten hold of the wrong phone number or address.

If the debt is not yours, Brooks says you need to fight it—in the right manner. Arguing with a debt collector over the phone, or even saying much of anything to a debt collector, probably won’t help your cause. Know your rights, as spelled out in the Fair Debt Collection Practices Act, which is intended to protect consumers from “abusive and deceptive” conduct by debt collectors.

Debt collectors are not government agents. They’re not lawyers, and they’re not the police. Debt collectors are tunnel-vision businesspeople driven, Terminator-like, to collect debts by whatever means possible—and yes, sometimes their tactics are less than ethical. They’ve been known to tell debtors that they owe more than they actually do, contact debtors’ employers (debts are not supposed to be discussed with third parties), and threaten that they’re going to send the police to a debtor’s home to arrest him (debt collectors have no such power).

In his book and in the conversation that follows, Brooks spells out what to do when a debt collector calls. First, ask for the collection agency’s name and address, and the amount of the debt—simple things that some people forget to gather during what can be an angry, scary, and confusing phone call. Next, wait for a letter in the mail stating the describing the debt, which the collector is required to send. Don’t bother speaking to the debt collector until after the letter arrives. After a validation letter arrives, send a letter either disputing the debt or requesting for a verification—at the very least, “the debt collector must cease collections until he responds back to you and verifies the debt,” writes Brooks.

If you can’t reach an agreement with the debt collector and it appears like you are going to be taken to court, Brooks says you really should get a lawyer, even though you’ll understandably be reluctant to take on the potential costs of doing so. Says Brooks:

“If you do get sued, one thing people don’t realize: You’ve got to get an attorney to represent you. I’ve seen a high percentage of the time, that when people get an attorney, the case gets dropped—because the vast majority of people don’t get an attorney. So if I’m a debt collector, am I going to go after the guy who’s got the attorney, or am I going to go after the guy who doesn’t?”

Listen in for more of my conversation with Brooks about his book, credit cards, debt collection, and how to protect yourself.

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