How to Negotiate With Debt Collectors

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If a debt collector contacts you over a past-due debt, you should verify the debt—and the collection agency—to confirm their legitimacy. If both are valid, it's best to face the debt head-on and proactively work to resolve it since unpaid debts could lead the debt collector to sue you for the amount you owe.

You may be able to settle the debt by negotiating a lower amount than what you owe. Here's how to negotiate with debt collectors and how it could impact your credit.

What to Do When a Debt Collector Contacts You

Here's a breakdown of steps you can take to negotiate with a debt collector and resolve your debt.

1. Verify the Debt

Before dealing with the debt collection agency, it's best practice to confirm the debt.
Under the Fair Debt Collection Practices Act (FDCPA), you should receive a debt validation letter detailing the specifics of the debt within five days of initial contact with a debt collector. This notice is often included in the company's first written communication with you.

If you didn't receive the debt validation letter, request one in writing before discussing any details, negotiating or making payments. Once you receive your notice, you have 30 days to challenge inaccurate information by sending a debt verification notice, asking the collector to prove you owe them money or to request further information. During this period, the collector must pause collection activities—and may not report the account to credit bureaus—until they provide you with written verification of the debt.

Learn more >> Should I Dispute a Collection?

Debt Validation Letter Information

When you receive a debt validation letter, it should include pertinent information regarding the debt, such as:

  • The original creditor you owe the debt to, including their contact information
  • The full and itemized amount of the debt
  • The date the debt became delinquent

The letter should also provide information on how to dispute the debt if you don't believe you owe it. You can file a complaint against the collector with the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and your state's attorney general's office if they fail to provide sufficient evidence of the debt but continue collection efforts.

Remember, it's a good idea to be cautious about talking with a debt collection agency before verifying the debt. You could inadvertently acknowledge the debt as valid, which might restart the statute of limitations on the debt.

Learn more >> How Long Do Collection Agencies Have to Collect a Debt?

2. Verify the Debt Collection Company

While you're confirming the debt, it's also a good idea to confirm the collection company has legitimate cause to collect. While there are many reputable debt collection companies, the industry also has its fair share of less-than-credible actors committing scams. Here's how to verify a collector has the authority to collect any debt from you:

If you can't confirm the agency's legitimacy and you have reason to believe it's a scam, consider consulting with a consumer protection attorney to explore your options. If you determine the agency and the debt is valid, consider paying the debt in full if it's within your means or negotiating for a lower debt amount.

Learn more >> How to Know if a Debt Collector Is Legitimate

3. Assess Your Finances to Identify Your Best Payment Option

After you verify the debt, start reviewing your finances to determine the best path to satisfy the debt. The fastest and most straightforward option is to pay the amount in full. If that's not an option, review your income and expenses to see how much you can comfortably pay. Agreeing to payment terms beyond your financial ability could make it challenging to pay your other bills and cause more financial hardship.

Before contacting the debt collector, determine the maximum amount you're willing to pay and decide what payment option is best for your situation.

Reduced Lump-Sum Payment

If paying the full amount isn't possible, explain your financial situation to the debt collector. They may be open to negotiating a lower repayment, especially if you can pay it upfront. In many cases, accepting a reduced payment could be in the debt collector's best interests. Since the collection agency purchased your debt from your original creditor—likely for pennies on the dollar—they may prefer accepting a reduced payment to recover their investment and make a profit more quickly.

Before you suggest a lump-sum amount, determine the maximum amount you can afford and don't budge. Start with a low offer, such as 25% of the debt you owe, and work toward a middle ground. Your debt collector may accept a lump—sum repayment amount between 25% and 50% of the full debt, but that is no guarantee. Some collection agencies require the full debt amount, while others are willing to work with debtors to varying degrees.

Repayment Plan

If you can't agree on a reduced lump-sum payment, you might negotiate a repayment plan that fits your budget. But, before discussing a monthly payment plan with the debt collector, focus on coming to an agreement on the total debt amount. Once that figure is established, setting up affordable monthly payments becomes more straightforward.

Make sure any payment amount you agree to doesn't compromise your ability to pay essential expenses like rent or mortgage, utilities, gas and food. If you can't reach an agreement that fits your budget, end the call. Try contacting the debt collection company again in a few days, as you might get a different representative who may be more inclined to accept your offer.

4. Get It in Writing

As you negotiate, you should take extensive notes, especially regarding claims the collector makes and any agreements made. You'll also want to record your conversation (if your state law allows it) and save emails, texts and online chats.

Finally, when you agree to a partial repayment or payment plan, make sure the agreement is confirmed in writing on company letterhead. Insist that the written agreement includes a clause stating the debt collection company will remove any negative reporting they've added to your credit report. Having documentation and written agreements may help to reduce potential misunderstandings later on.

Learn more >> Can a Collection Agency Legally Put Their Account on My Credit Report?

How Much Will a Debt Collector Settle For?

There's no standard amount or specific percentage a debt collector may settle for because several variables come into play. The amount you settle for could depend on your financial situation and the age of the debt.

Also, policies vary among debt collection agencies. While one agency may accept 20% of the original amount owed, another may insist you pay at least 80% of the debt. Still others may not accept anything less than the total debt amount. The terms of any agreement you reach with the debt collection agency will depend on your negotiation skills and the collector's willingness to negotiate.

Will Settling My Past-Due Debt Help My Credit?

Settling your past-due debt may help your credit, especially if your creditor still holds the account. In that case, contact your creditor immediately to make payment arrangements and avoid further collection efforts. Late payments will hurt your credit, but the damage could be made worse if your creditor charges off your account and sells it to a collection agency—adding a collection account to your credit report.

If the debt is already in collections, it's still worthwhile to repay it in full or settle it for less. Settling your account is generally viewed more positively than not paying the debt at all, but not as positively as repaying it in full.

Take Steps to Build Your Credit

If a debt collection company is calling you or sending notices, it's imperative to deal with the issue promptly. Verify the debt collector and that the debt is legitimate and dispute the collection if it isn't. If you do owe the debt, it's best to pay it off in full instead of negotiating a settlement.

Late payments and collection accounts on your credit report can harm your credit for up to seven years, though their impact may lessen over time. In the meantime, you can take steps to rebuild your credit. You might start by checking your credit report and score for free with Experian. You'll discover where your credit stands and what, if any, other issues you might need to resolve.