Dealing with Collection Agencies

Now that you have a good understanding of how to dispute collections with the credit bureaus, we are going to move to the hardest part of our credit repair tutorial, dealing with the collection agencies.

First, we must learn the golden rules of dealing with collections agencies.

Collection agencies are the Devil
The Devil Lies.
Never, ever, give a credit card, debit card or checking account number to a collection agency. Make all payments via certified mail with a money order or with certified funds.
Never pay off or make payments on a debt UNLESS you have a written agreement spelling out EXACTLY what they will do in exchange for payment. Make sure this is written on their company letter head and signed by a supervisor.
Asking to speak with the supervisor rarely works, they are usually glorified collection agents who rarely have the power to make changes.
Never ever tell the collection agent that you are trying to clean up your credit for a specific reason, i.e. buy a car or qualify for a house. They will not budge or negotiate.
Collection agencies hold all of the cards, losing your temper will not help you. However, they are all on commission, this is your primary weapon.
Never accept the collection agent’s first offer, or believe that their boss wont let them take less than than a certain amount. See rule number 2.
Never give collection agencies permission to call you at work, do not call them from work, do not give them any information about your work. Collection agents are like vampires, they cannot enter your place of work unless they are invited.
If the agent gets you mad, they win, egos and tempers are the biggest killers of business deals.

When Negotiating, Never Forget Your Goals

Repair Your credit as soon as you can.
Pay the least amount you can to satisfy your obligations.
Have negative remarks removed as soon as possible.

It’s easy to lose sight of of your goals when negotiating, tempers will flare and egos will collide. Drawing a line in the sand, i.e.” I wont pay a dime over $xxxxx” calls each person’s ego into the mix, ensuring that you will either have to pay the full amount or not pay the debt at all.

Remember your goals, it is very likely that you may have to “lose face” to accomplish your goals and get your best deal; but who cares, this is business!

When negotiating, ALWAYS use the “please help me” gambit instead of the “I’m a great negotiator” gambit. It’s been proven time and time again, that in sales, that MOST people are more willing to help someone during negotiations than they are to haggle with them. Asking a salesman to help you get the car you need for $xxxx because you’re a single mom and this is all you can afford, will always yield more fruit than telling the salesman you won’t pay more than $xxxx. On the whole, people are programed to help other people, it’s just human nature.

The art of negotiating is letting the other side feel as if they have won, or are winning, the negotiation. When really, you have secretly accomplished all of your goals that you set out to accomplish. Negotiating is a game of chess, never reveal your goals or broadcast your moves. Like I said earlier, egos are almost always to blame when negotiations are unsuccessful.

The best way to remove “ego” from the negotiations is to establish a higher power.

The way that you set up a “higher power” is to invent a person who is calling the shots for you. This will allow you to place the blame during tough negotiations on an imaginary character. For instance, you can say something like this, “my uncle is a tax attorney and he told me to ask you for X, Y and Z. He told me he would help me pay-off all of my old debts if we could get a good deal.

Doing this allows the “uncle” to be the bad guy and gives you the power to, naively, ask for too much without offending the agent. When the Uncle asks for too much the agent can reply with “he’s crazy” or something like that without directly offending you or drawing a line in the sand. The Uncle can be as tough as he wants and the collector can be as mean as he wants and you are the poor messenger who’s caught in the middle, and the egos are kept at bay.

Using your higher power, I suggest that you, I mean your Uncle, ask for the impossible to begin with. On your initial phone call I suggest that you ask for these concessions right off of the bat:

Ask the agent to take 40 cents on the dollar for the debt. (The average settlement is .60 cents)
Ask the agent to remove any marks that they have reported about you on your credit bureau. (They really can rarely do this, but your uncle says they can and he is an expert, again the uncle is the bad guy, not you.)
Give you a letter stating that they reported the collection in error. (This is the only way that you can legally remove collections from your bureau. This is unlikely to happen, but this is a good bargaining chip to use later to help you accomplish your real goal, the lowest price to pay off the collection)

Let every offer and counter offer come from the uncle. For example, “my uncle Bob said that most collection agencies will take .40 cents on the dollar for this type of debt”. At this point the collection agent is probably going to tell you that your uncle is an idiot and there is no way he could even come close to that figure.

They may even ask to speak with your uncle to continue the negotiations. Obviously, you want to keep the uncle elusive and alive. So, I usually say something like, ” my uncle is a very busy attorney, I gave him your number and he said that he will call you if he has time.”

Keeping your eye on the ball, sheepishly ask the collector what they consider a good deal is so that you can tell you uncle what they said and maybe you can get him to change his mind. This will usually get the agent to throw out the first offer, which is exactly what we wanted. Half of the battle of negotiations is getting the other party set the starting point. There is a 99% chance that they “high-ball” you.

After getting the collectors off you hang up and call him back the next day with the uncle’s counter offer. During this counter offer you want to turn your focus on the decoy concessions you asked for in the beginning, the letters and to remove the negative remarks. You should say something like, ” I told my uncle what you offered, man, he’s really tough.

He said, “if you could remove the bad remarks, and give me a letter stating that you guys reported this in error he would be willing to pay .50 cents on the dollar”. The collector will again tell you that your uncles’ crazy and will probably ask to speak with the uncle again. Now you must say something like, “hey Bob, I just want to get this stuff paid off, can’t you do a little better so I can get my uncle to pay this for me?” Regardless of the collectors offer, tell him that you will try again with your uncle and call them back tomorrow.

Now you are on the collectors side and trying to get the mean uncle to say yes. Does this sound familiar? It should, it’s the good guy bad guy gambit. Car salesmen use it when they are trying to get the nasty ole manager take the deal on the car, when secretly, the salesman and the manager are both working you for the best price they can get.

Now all you need to do is to have your uncle make a little higher offer if he can get the credit letter. Do the same with the concession of having remove the debt completely. The key to this whole process is that you are never the bad guy.

You will probably reach an impasse at this moment, which is what we wanted. Now you can tell the agent that you cant pay the debt off because your uncle refused to give you the money. What you have really done is told the collector that I will not (can’t) pay anymore for the debt than $xxx and left the negotiations open.

Do not call the collector back! Wait a few days, the collector will call you with a better offer. You can take the offer or repeat the steps above.

Just remember, the collector cannot remove negative remarks from the bureau unless they have reported the remark in error. However, if you keep asking for this decoy concession, the collector may reduce the debt in lieu of removing the remark. Remember, the collectors are on commission, they want you to pay something.