Have you ever been called by a collector? It’s not a pleasant experience. I’ve only received one collection call, but it was terrifying. I was in my early 20’s, already had a decent amount of debt, a reasonably expensive mortgage, and had recently quit my job to pursue one of my hair-brained million dollar schemes. Oops. Anyway, I was 30+ days past due on my mortgage, so I received a call from the mortgage company.
Here’s a summary of the message that was left on my answering machine:
“Hi Mr. Tecmire, I noticed that you were 35 days past due on your mortgage. Do you know when you’re going to be able to make last month’s payment?”
Here’s what I heard:
“Hey kid…you’re dead! If you don’t pay your mortgage in the next 24 hours I’m coming over to your home, stomping on your petunias, and ripping your toes off one by one. Watch your back!”
Do you want to know the strangest part? I didn’t even have any petunias! That’s how I knew it must have been all in my head. The point is that getting a collection call can be scary. The embarrassment, the uncertainty, and the fact that you have to come up with money that you don’t currently have all contribute to unwise decisions.
I know because I’ve also been on the other end of the phone. I recently worked in the collection department of a small community bank in Northern Michigan. I spent over a year of my life talking to people who hadn’t made a payment in months – everyone from the teacher who just got laid off and needs a couple months to get back on her feet to the doctor with the lavish lifestyle and $200,000 in credit card debt. I’ve seen and heard it all. I’ve heard heartbreaking stories that made me want to weep, and I’ve heard professional liars spin yet another amusing story. The world is made up of all kinds. This article is meant to help the folks who are really trying to get by and have fallen on hard times.
Dealing with a collection call is really pretty simple if you know what to do. Here’s the scoop.
Disclaimer: Dealing with outsourced collection companies and credit card companies rather than a local bank can be a very different experience. They are the ones that tend to hound you relentlessly until you pay. Credit card companies are often the most annoying. Why is that? Because they have very little recourse against you – the credit card is unsecured. The lack of collateral means they don’t have nearly as much leverage as a bank that can foreclose on your home or repossess your car. The lack of leverage means that the credit card collectors will call you 10 times a day and essentially annoy you into paying.
I would never advise you to not pay your debts back. I fully believe that we should live up to our initial promises to pay back our loans, but if you’ve literally done everything and can’t find enough money to pay everyone, make sure you prioritize your loans properly. Those debts that are secured by something that can be taken away should be paid first.
What to do when you receive a call from the collection department . . .
1. Pick up the phone.
Very few people do this, and yet it’s the most important step in keeping your bank happy and your car in your driveway. In any relationship, communication is key, and this situation is no different. If the bank hasn’t heard from you in three months, you won’t answer your phone, won’t respond to letters or emails, and still haven’t made a payment, what do you think is going to happen? Don’t make it such an easy decision for the bank.
The purpose of 90% of collection calls is simply to remind you about a payment that’s due or find out when you’ll be able to make that payment. It doesn’t have to be scary. Even if you’re not sure when you can make your next payment, it’s best to make that clear, than to say nothing at all.
Ignoring the problem is the worst thing you can do. I can’t stress that enough.
2. Be honest.
It’s always a good idea to tell the truth. Let’s say the bank is asking you when you can make last month’s mortgage payment, and you promise that it will be made this Friday . . . follow through with your promise. Be careful not to “slip” and promise something you know in your gut you can’t follow through with.
3. Come up with a legitimate plan (and follow through).
Let’s say you tell the truth and mention that you won’t get paid until the 1st of next month. Also, you have to pay your heat bill and car payment out of that check, but you should have enough for one payment plus an additional $100. After that you should be able to apply a little extra each month to catch up. It might take a few months until you’re fully caught up, but it’s the best you can do at the moment.
While it may not be the perfect scenario, it’s at least honest and, as long as you follow through, the bank will continue to be lenient. Leniency and honesty go hand in hand when it comes to collection.
4. Call if the plan changes.
Again, communication is key. Enough said.
5. Analyze your finances.
If life has thrown you a curve ball, and your financial situation is not what it used to be, it’s time to frugalize your life a bit. In other words, where can you “find the fat” as I like to say to get back on track? We all have some fat on our budget that could be trimmed if necessary. Remember that the quicker you make the necessary adjustments, the quicker you’ll be out of this mess. Cut out the obvious luxuries, and then take a deeper look if that’s not enough. Our food budgets are often some of the most bloated. Maybe try that next.
The Bottom Line
How you respond to collection attempts is important. There’s a right way and a wrong way to do it.
Scenario #1 – You can’t make your car payment. You haven’t followed through with your promises in the past and are now completely ignoring your bank.
Scenario #2 – You can’t make your car payment. You’ve been honest about your situation and have proven that you’re really trying to catch up.
In Scenario #1 your car will may very well be picked up within 45 days. However, with Scenario #2 it would probably take at least 90 days before the bank finally decides to take action – even if you never make a payment during that time.
Remember . . . a collection call doesn’t have to be scary. It’s really up to you.
Have you had to deal with collection calls? How did it go, and would you have done anything differently? Leave a comment below!
This is a guest post from Chris Tecmire. Chris started SimpleFamilyFinance.
{ 12 comments… read them below or add one }
Great advice. Face it, deal with it, learn from it, move on.
Thanks Mike. You got it – unfortunately, most of the people that I used to deal with when I worked in collections didn’t see it the same way. Apparently they didn’t realize that they were only making things harder on themselves.
Thanks for the advice. We all have our rough spots and it’s good to know what to do to keep our petunias in good shape
What’s more important than the petunias
I’ve personally never dealt with a collectin agency. But I really like the advice you gave.
Thanks Ornella. I’m glad you’ve never had to deal with it – keep up the good work!
We have never had to deal with a collections agency, however, someone with the same name as my husband has some very poor credit. We receive phone calls periodically from agencies that think they have the right guy, nothing gives us more pleasure than hanging up on them when they tell us our credit will be ruined forever if we don’t fix the problem. We take great pride in being debt free, it is very liberating. I do have a hint, pay cash for everything. Don’t buy it if you have to borrow money. If you don’t try and borrow money, then your credit score really doesn’t have much effect.
God CLEARLY says not to be a debter, questions?
This is an example of how honest communication can end up with results we’d never guess possible.
At one point in time I was living on very little money. My emergency account was whatever spare change I had, collected in a jelly jar. During a bad month, I would often use that money, usually around $10, to buy bread, eggs, etc to feed myself for the last week. (And please, before any of you start telling me how I should have fixed my life, realize that there are many things which you do not know about the situation.)
I had a car payment during that time and I was working retail. My hours were cut back because business was cut back. I called the bank who owned the car loan and told them what was going on. Their suggestion was that I could skip payments for two months and then those would be added on at the end of the loan, with no extra interest or penalties.
I was stunned. This possibility never would have occurred to me. After the two month period, business picked up, my hours picked up, and I was able to make all the payments until the car loan was paid off.
That’s a great example Anne. Banks will usually deal with you if it looks like you’re trying, and you obviously were. We would do short-term extensions like that all the time for people who needed it. We’d even get them help through government programs if they qualified and needed the assistance.
Thanks for the comment!
I had a collection lady call for the first time about a year ago, for a medical bill that i owed. She was kind of rude at first, but once I explained my situation, and let her know that i was willing to work on a plan that worked for both of us, she became quite pleasant! She would call every month to take a payment over the phone (as we had set up, saves on stamps, and me forgetting) and i would pay the promised amount as agreed. Last month i made my final payment, and we both were excited about it. She was glad she could help, and i was glad to have it gone, however i will miss our short 5 minute chat-sessions every month, i won’t miss shelling out the money… on to the next bill to get paid off!
Congratulations on paying that debt off Judy! That’s a great example of how things can work out. Even if the person on the other end of the phone is rude, as Christians, we have a responsibility to be kind and courteous. Most of the time, rude collection people are rude because they’re frustrated – you wouldn’t believe the people and the lies that they deal with on a daily basis. So, once you show them that you’re not like that, they’ll most likely be thrilled because you’re making their job easier. And who doesn’t like that?