The other night on the way home I caught a bit of The Clark Howard radio show. Howard is a consumer advocate and author with a great radio show that I don’t often catch because it is on after 6:00pm in my market, a time I’m usually spending with family after a long day at the office. One call in particular really caught my attention that night, partly because of the situation the guy found himself in, but mostly because of the way he discovered the mess.
A Little Background
Hard to obtain all the details about the individual’s case in a five minute phone call, but here is a quick summary of the call. According to the caller he owed about $5,000 on a credit card that was charged off a couple years ago. Apparently, the creditor eventually got around to collecting (probably after they sold the debt for pennies on the dollar) and contacted him to work out a payment arrangement.
The caller agreed to send the collector $500 a month for 12 consecutive months to pay the debt off in full. He faithfully sent along his payments for $500 each month, and at the end of the year he checked his statement and the outstanding balance was $5,400. Apparently, the balance had actually gone up thanks to a 31% interest rate and various fees! I’m not sure how accurate the guy’s numbers are, but his story serves as a great reminder for those dealing with collectors, or any creditor for that matter.
Always Check Your Statement
The caller’s story was troubling for a couple reasons. First of all, if he could have scraped up a little cash (or already had some in savings) he could have probably settled the debt for a couple thousand dollars as settlement-in-full. He should not have done anything without receiving the terms of the workout offer in writing from the collector. And he definitely should have been checking his statement all along to make sure his payments were being correctly applied and his balance was reduced accordingly.
I can’t believe he actually waited a full year before checking, or requesting, an updated statement on his account. Unfortunately, there are still a lot of people out there who trust banks and collection agencies explicitly. The hard truth is that there are a number of unscrupulous agencies out there running around collecting old debt who use any number of tactics to separate you from your money.
I’m not telling you that every collector you come in contact with will lie to get money from you, but I am telling you 99% of them will. I know, I used to work in a call center environment (thankfully I didn’t have to do much collections, but I worked next to them). It was common practice to use all sorts of pressure tactics to talk people into making payments over the phone, or give up details of their checking account for auto-drafts of their accounts. The next call from that customer usually came to us in customer service–”Why did you guys wipe out my entire checking account, I only agreed to $25 a month?”
Of course, I had to tote the company line at the time, but secretly I wanted to tell these people, “They took out all of your money because they lied when they said they wouldn’t.” Plain and simple. So please, always get these work-out agreements in writing, and always keep up with your account statements to hold the collector accountable for following through on their end of the deal.