Here’s a brief commentary sent to me by an email from one of my readers. I don’t know that all of the statements herein are legally valid, nor can I say that the documents at the associated link are effective–so take it all with salt. But the text seems credible, practical and worth your consideration:
“Negotiate your debt collector or sue against them
“If you pile up a huge debt that you are not being able to pay back, your creditor has all the right to sell your account to a debt collection agency.
“But Fair Debt Collection Practices Act states that if a debtor disputes his debt within 30 days of receiving his collection letter, it will immediately put a stay order on the collection activity of your creditor. Further collection activity could commence only after your debt amount is verified by the creditor. But if you do not send any type of dispute letter or debt settlement letter (http://www.ovlg.com/letters/) to your creditor, he will be within his rights to pursue his collection effort.
“Now, employing our legal rights given by FDCPA, we can settle our debt for less than we owe.
“In order to receive forgiveness on your debt, you have to reply to your creditor by writing a dispute letter. Then you have to turn it into settlement letter where you should mention on the letter that negotiation process has begun. A settlement letter and a dispute letter may look similar in format because a settlement starts once you disagree to the amount owed. But, you must clearly mention that you are looking for a negotiation. It can make a settlement letter stand apart from a mere dispute letter.
“If in any way, a collection agency violates FDCPA rules, the federal law will go against them. You do not need to be proactive to prove that your creditor has violated the laws. Rather, any violation on their part will immediately bring federal punishment on the creditor or on the collection agency.
“According to law, any kind of creditor’s harassment pertaining to the collection of debt will invite severe punishment on the credit company or on the collection agency. They may call you over phone or contact you in other ways if you do not send them a cease-communication-letter.
“But if they use abusive language or threaten you to put in jail, it could undermine their collection effort. Such conduct will be considered by Federal law to be unethical and illegal. And if proved on the court, they might have to face penalties for that.
“More, no collection call could be made before 8 am and after 9 pm. Otherwise, if they call you at any odd time, this will be considered to be illegal by federal law. In such instances, you could record the telephone conversation between you and your creditor and put that record before the court. This could prove to be disastrous for your creditor or for the collection agency.”
I see one cause for concern in the previously-outlined strategy for dealing with debt collectors: Once you agree to enter into any settlement or negotiation over the amount of the alleged debt, you will have implicitly admitted that 1) some debt actually exists; and 2) that that you are (or you represent) the debtor.
This admission may be unavoidable but, generally speaking, I doubt that you ever want to go to court in the capacity of a confessed debtor. A debtor in court is virtually certain to lose.
Therefore, once you enter into negotiations over the amount of the alleged debt, you may be virtually compelled to reach a negotiated settlement that the creditor is willing to accept.
Why? Because once you admit that you are a debtor, the balance of power shifts to the creditor’s favor. If you hold out for an unreasonably low “settlement sum,” the creditor may take his case to court where you (being the self-confessed debtor) may be ordered to pay a far greater sum than you’d hoped–plus court costs.
If the law allows, I’d suggest that your first line of defense might not be to demand that the creditor verify the amount of the debt, but instead verify the existence of the debt. I.e., what evidence exists to prove that the debt collector is truly your creditor and you are truly his debtor?
As I understand it, “verification” requires someone’s statement under oath. If so, the existence of some debts may be surprisingly difficult for a creditor (and especially debt collector) to “verify”. Can anyone be found who truly remembers the creation of the alleged debt with sufficient certainty to be able to swear to the debt’s existence? Frequently, the answer to that question is No.
My guess is that in a debt collection dispute, the alleged debtor’s first order of business may be to demand that the creditor verify the existence of the debt. If the creditor can successfully verify the existence of the debt, then the debtor’s next line of defense may be dispute the amount of the debt, demand verification of the amount, and then enter into negotiations with the intent of repaying at least part of the debt without going to court.
More, I’m inclined to view all debt collection letters as Notices. I believe that every notice creates a “right of inquiry”. If anyone sends you a Notice, I believe you are thereby entitled to respond by asking questions. I.e., before you even dispute the existence or the amount of the alleged debt, before you enter into settlement negotiations, you may want to ask some questions. If you are astute and can ask some questions that the debt collector can’t (or won’t) answer, you may be thereby denied procedural due process, and the debt collection process may grind to a halt.
I’ve written a number of articles that explore this theory of Notice and Right of Inquiry. A list of those articles can be found at http://adask.wordpress.com/category/notice/. The earliest articles (found at the bottom of the list) would tend to be most instructive as to the general elements of this theory. The later articles (towards the top of the list) tend to deal with specific applications of the theory.