How to Effectively Deal With Debt Collectors

Have you had the phone ring and someone from some Debt Collections Company is on the other end, wanting "to help you pay your debt"?

What should you do? Go along with them and make some offer you can afford or tell them where they can go jump!

Well before you answer that, you need to understand how Banks and other Credit Institutions "lend" money.

The appearance, and what we are kind of being told, is that the lender has a pile of money sitting around that he likes to lend to someone who can pay it back, and if you just apply, you could qualify for a loan or card.

The Truth is that no Bank EVER lends any of its own money or any of it's depositors money. What happens is that your application is converted into a Negotiable Instrument worth the amount you are applying to borrow. The bank takes your application and either trades it for funds or uses it directly as a deposit from you. It then credits your account with the money you asked for. It's books are now balanced.

Now it wants the money of the loan again from your labour as well as interest. Now do you see why the banks make such obscene profits all the time? For a more complete picture, type "Money as Debt" into Google Videos.

Anyway, back to the Debt Collectors. These businesses has bought you "debt" for a fraction of the value of the "debt". They are now hoping to recover the full amount from you, or at least more than they paid for the account.

If you have decided, taking the above into consideration, that you rather pay it off, then go ahead and deal with them. Preferably pay as little as possible and save the rest until you can make an offer to settle the "debt". If you write a settlement cheque, first get in writing that you will not receive any more claims against this account from anyone including the Original Bank. Also get in writing that Credit Rating Agencies will be informed that the account has been paid in full (not settled).

Write on the check "Full and Final payment". If they cash it, they agree to this.

If however you do not think they should have any money, make it clear from the beginning that you do not recognize their authority. Do not agree anything with them, like submitting to their "For Security purposes, can you please tell me...". If you do, you have with your actions said "I grant you the authority you seek". Do not admit you have a debt even. It is none of their business.

They will try all kinds of bluffs. They will say that they act on behalf of the Bank. That they by signing your application and thereby accepting the Terms & Conditions, you agreed that they can collect money for the Bank. (You agreed that the bank can transfer the account to a Collection Agency - so you do not object to that. But you never agreed that such an agency is having the authority to collect. See the difference?)

Truth is - they are third party interlopers and you have no written contract with them, and you should not enter into any verbal or implied contract by anything you say or by cooperating. You should not even talk to them. I interrupt them immediately and say "I do not discuss important matters over the phone, if you have anything to say to me, put it in writing and I will reply in writing". Remember they record the call, and if your tongue slips, they will make a transcript and use it against you.

You need to reply to their letters promptly, or you will be in dishonour, which will let them take the matter to Court for settlement.

I have sent them all packing by just repeating in various ways that I do not deal with them until they have proven their jurisdiction - either they come up with a contract between them and me or they show me the law they are operating on. Not one of them have been able to do this and have eventually given up, without attempting to take me to Court. They may have a lawyer write me, but they have all been asking for payment, so they too are acting as debt collectors, and I treat them the same. They know the law, so they do not write more than once.