Thursday, 24 December 2015

Paying to a Collection Agency – Check on the Following

Have you defaulted on your repayments to bank or other lending institutions? In case the answer is yes, then not only will your name reflect in CIBIL defaulter list but you would also be chased by the appointed collection agencies.

Having a collection agency contact you is never a pleasant experience. They work with an individual’s creditors (whether a bank or financial institution) to recover money when the person has failed to repay debt taken from the lender over a period of time. 
Historically, the very mention of a collection agency fills one with dread, but it is the unfortunate outcome of not repaying debt as per schedule, i.e. failing to service a loan or pay off credit card bills in a timely manner. In the recent past, agencies have been known to harass customers with phone calls and using intimidating language to get them to pay. If you do have any such call to your name, it is not necessarily the reason to hit the panic button. There are ways and means to work around the situation, let’s discuss what all you should know.

Confirm the authenticity of the collection agency – very often, scamsters pray on unsuspecting individuals by pretending to call from a collection agency. Hence, should you receive a call, the first thing to do is ascertain the genuineness of the caller – do not hesitate to ask for vital information such as the name of the agency, valid identification proof, and the amount they claim you owe. Remember, if someone declines to provide you this basic information, it is likely that you may be the unsuspecting victim of a fraud or scam.

Maintain detailed records – It is very important to have precise records of your interaction with a collection agency, so make sure you are diligent about it. Every time an agency contacts you, ensure that details regarding the conversation are recorded by you for future reference. This includes the name of the agency, the person/ representative you are speaking to, the amount you apparently owe, as well as the date and time that the conversation has taken place. It would also be wise to maintain a summary of your conversation. 
If you are contacted by any other means (apart from telephonically), maintain records – for example, copies of any letters sent to you, or emails. If you in return reply to an agency, be sure to keep a copy of that communication as well.

Request communication in writing – It is often easy for someone to go back on a spoken word, but it is not so with written communication. Hence, wherever possible, ask the agency to get back to you in writing and as mentioned above, maintain records of the same. 
If you receive any such communication, formulate what your response is going to be, and reply accordingly. Remember an agency cannot threaten any legal action, and if they do insist that they can, request for that in writing. If you fail to receive any such documentation, in all likelihood the claim is invalid and merely a tactic to extract payment.

Know your rights – As a consumer, depending upon the state/ area you live in; familiarise yourself with the prevailing law. If you are contacted by a collection agency, you should read up on the law/ rules and regulations laid down for agency operations, as well as those that protect you, the consumer.
With the fairly recent concerns with regards to the treatment meted out by agencies to customers, among the prohibited practices are:
  • Using threatening or abusive language
  • Calling before or post typical working hours, unless you have consented otherwise
  • Issuing threats such as carrying out legal action, which can only be done by the lender and not the agency itself
Speaking with an agency representative – Remember, the agency can request for information pertaining to your contact information. They are not privy to your banking or any other financial information, so if you are being asked for the same, firmly decline to provide it, unless relevant to the transaction you have defaulted on.

Do try and stay calm, getting flustered or getting angry and yelling at a representative may do more harm than good. Convey your willingness to work towards repaying debt, and if possible explore the possible options available to you to do so.

Making payments – Never make payments directly to a collection agency and/ or its representatives, no matter how much they urge you to do so. Also out of question is providing a personal cheque or transfer to someone’s bank account to settle dues. Instead, route all payments to the lender, and maintain proof of the same. 
Of course, not always does a person default on a loan or credit card payment willingly; it is also the rather unfortunate outcome of possibly dire financial difficulties. In such cases, before the case reaches the collection stage and necessitates being contacted by an agency, it may be prudent to contact the lender yourself. This may just help keep you out of the loan defaulter list. If possible, try to work out a modified repayment plan that you can easily honour, and eventually aim to pay off your debt fully.

Also, keep in mind that a default impacts your credit score negatively, hence ensure you take adequate measures to stay out of a loan defaulter list.

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