Collection Agency Letters - A Sample Letter You Can Use

Article Summary - This article offers a sample letter you can send to a collection agency, to prevent them from contacting you in the future. Please note that this technique does not make your debt(s) go away. It merely prevents the agencies from calling you.

Phone calls from collection agencies can be a real nuisance, especially when they're not warranted. I once had an agency call me repeatedly for two weeks, about a debt that wasn't even mine. Even worse, it was a recorded message, so I couldn't tell them to stop calling right then and there. What a hassle.

Fortunately, there is something you can do about this annoyance. You send the collection agency a letter, telling them not to contact you anymore. They must honor the request, in accordance with the Fair Debt Collection Practices Act (FDCPA).

The letter doesn't have to be fancy. It just needs to include your name and phone number, along with your request that they end all communication with you. These are commonly referred to as collection agency letters, and you can find samples of them all over the web. There are only a few key components you need to include. For your convenience, I've included an example below.

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Sample Letter Follows
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Your Name
Your Address

January 5, 2010

XYZ Collection Agency
123 Elm Street
Austin, Texas 78754
Subject: Debt Collection Against [Your Name]

To Whom it May Concern,

You have been calling my phone number about a debt that is not mine. In accordance with the Fair Debt Collection Practices Act, I am sending this written request that you stop contacting me immediately.

My phone number is 555-123-4567. Do not call this number anymore.

Sincerely,

[Your Name]

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Sample Letter Ends
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Like I said, it doesn't have to be fancy. It just needs to include your name and phone, along with the request to cease all contact. Once the collection agency receives your letter, they cannot call you anymore. They can call to acknowledge receipt of your letter, but that's it. Anything beyond that, and they are violating the FDCPA.

Keep in mind, this sample collection agency letter is for companies who are contacting you in error. If they're calling about a legitimate debt that you owe, you may need to include additional information (such as the creditor and your account number). You can find an example of that kind of letter on this page.

Lastly, you should send your letter by certified mail, with a "return receipt" requested. You have to pay for this, so you might want to try sending the company an email first, or calling them back on the phone. Start with the easiest methods (email and phone), and then send the letter if the calls continue.

Related Articles:

• Dealing with debt collectors the right way
• Know the laws about debt collector harassment

I hope you have found this article and sample letter helpful. If you want to learn more about your rights when dealing with debt collectors, use the search tool at the top of this website. You can also find a lot of helpful information on the Federal Trade Commission's website, which is located at FTC.gov.

Can a debt collector call me at work?

Question: "I have had a debt collector call me at work recently. Can they do this? I didn't think collection agencies were allowed to contact me at work. What are the laws that prohibit this?"

If you tell them (orally or in writing) that you are not allowed to receive calls at work, they can no longer try to reach you there. This rule is clearly stated in the Fair Debt Collection Practices Act, or FDCPA.

You can also stop them from contacting you anywhere else by submitting the request in writing. You would send them a certified letter (with signature requested) that basically says "stop calling me." They must honor the request. Of course, they can still seek legal action against you. They just can't call you about your debt anymore, at work or at home.

There are two exceptions to the rule mentioned above. Even if you send a written request as I've described, the collection agency can call you in order to (A) acknowledge your request, or (B) to tell you they are filing a lawsuit against you. But aside from those two provisions, they cannot call you at work or anywhere else.

If you haven't done so already, you should familiarize yourself with the debt collection rules and regulations that have been established over the years. You can read the FDCPA in its entirety on the Federal Trade Commission's website (FTC.gov). They also have a list of frequently asked questions about this law, and it includes the question you asked. It's certainly worth a read, especially if you have collection agency people calling you at work.

This article answers the question: Can a debt collector call me at work about a collection? If you have other questions about this industry, or the laws that regulate it, try using the search tool at the top of this page. We have a lot of articles on this subject, so you'll probably find what you need.

The Problem With Debt Settlement Companies

On this blog, we frequently warn our readers against using debt settlement companies to handle their debt problems. This is one of the most scam-ridden industries in America. In terms of ethics and business practices, this industry "ranks" right up there with the so-called credit repair companies. You're better off avoiding them both.

Many experts say you should only consider debt settlement companies as a last resort. I disagree with this. I don't think you should consider them at all. If you have problems with debt, there are much better ways to handle it. Skip to the end of the article if you want to see my recommendations. But first, let's talk about the reasons you should avoid these companies in the first place.

The Problem With Debt Settlement Companies

So what's the problem with debt settlement companies, anyway? The biggest problem, as I see it, is the fact that they usually make your problems worse. In most cases, they actually add to your debt by charging fees for their services. That would be great, if they actually helped you reduce your debt load. But as you can by the Better Business Bureau ratings below (and other sources cited), these companies rarely live up to their promises.

Here's another problem I have with debt settlement services. In most cases, these companies make the same promises. They claim that they will deal with your creditors "on your behalf," in order to "negotiate a lesser amount" on the debts you owe. I put these phrases into quotes, because they are very common in the settlement industry.

Here's the problem with these claims. In many cases, debt settlement companies won't even attempt to contact creditors on behalf of their clients. They say that they will, and they often go so far as telling their clients to ignore creditor phone calls. Later, the client learns that the company made no effort to work with their creditors -- nor did they even contact them.

Then the client desperately contacts their credit card company (or whoever they owe money to) and says: "But what about XYZ Debt Settlement Company? They were supposed to be handling this." The creditor says they've never even heard of the company, much less worked with them.

In many cases, this is how debt settlement companies work. They make big promises, they charge up-front fees, and then they fail to deliver on their promises. The client is left with even more debt, and probably some collection calls as well. And they paid for all of this!

Many Receive Failing Grades

But don't take my word for any of this. Here's a sampling of Better Business Bureau (BBB) records for debt settlement companies in the U.S.

• Debt Settlement USA -- This company is located in Scottsdale, Arizona. According to their website, they are "arguably one of the most effective consumer debt reduction program" in the United States. But the BBB gives them an 'F' for various reasons.
• Debt Relief Center USA -- This company also makes bold promises about what they can do for their clients. But this is in stark contrast with the failing grade given to them by the BBB. The bureau gives them an 'F' for many of the same reasons cited for the company above.
  
• U.S. Debt Relief Center -- Yes, you are noticing a trend. Many of the settlement companies include "USA" (or some variation) within their company names. That's all very patriotic, but the BBB still gives them an 'F' like the other services listed above.

I'm not saying that every debt settlement company in the United States has an 'F' rating with the BBB. But you get the idea. This industry is full of bad apples. It also generates more bad press than any other industry I've seen. Let's take a look at some of this publicity:

Debt Settlement in the News

Still not convinced? Do you need more reasons to avoid debt settlement companies entirely? Consider the following quotes:

• "[H]aving a debt-settlement company do the legwork for you is fraught with risk, not to mention outrageous fees." -MSN Money
• "The experts agree, however, that 'buyer beware' is the best advice when considering debt settlement companies." -Jane Birnbaum, New York Times
• "Some companies encourage debtors to stop paying their bills while they save up for a lump sum payment, even though consumers continue to rack up late fees and other penalties..." -The Baltimore Sun
  
• "As tempting as their ads may be, debt settlement companies can leave you in worse shape." -Greg Hudson, BBB.org
  
• "Such companies often don’t provide the relief people are looking for, said Bullock [Montana Attorney General], whose office began regulating the firms last October and is already investigating several complaints." -Missoulian.com
  

I think you get my point, so there's no point in beating the drum anymore. It just makes me angry to hear horror stories from people who've been worked over by these companies. I get emails from them, and it's never easy to hear.

People go to these debt settlement companies because they're in desperate financial situations, and they need help. Instead, they're often left with even bigger debt problems than before -- and they pay hard-earned money for this "privilege." That's why I've gone to such great lengths to warn you away from these kinds of services.

How to Find Legitimate Help

If you need help managing your debt load, you should look into one of the non-profit organizations that offer such help. They offer free and low-cost counseling services, so you don't have to worry about racking up a bunch of fees.

Learn more here:
Where to Find Non-Profit Debt Help

Legal Note: I make no claims or assertions about the individual debt settlement companies listed above, aside from sharing their Better Business Bureaus records with you. I do, however, make some assertions about this industry as a whole. It's full of sharks and scammers, and you're better off avoiding it.

720 Credit Score - Is it Still a Good Score in 2010?

Question: "Is a credit score of 720 still good enough to get a mortgage loan? I plan to buy a home in 2010, and I just checked all three of my FICO scores. The middle number was 720, which I was told would be the one used by lender. Does this make sense? Is this good enough to get approved for a loan, do you think?"

I cannot tell you whether or not you'll be approved. Only the lender can tell you that. But I can tell you that a 720 credit score is generally good enough to get a mortgage. In fact, you're well over the 620 minimum used by Fannie Mae (and all lenders who sell their loans to Fannie Mae).

"Generally" is the key word in that last paragraph. There are other factors at play, aside from your FICO score. It's certainly important -- but it's not the only piece of the mortgage-approval puzzle. The lender will also measure your income against the amount you're trying to borrow. They'll also compare your income to your debt, which is aptly referred to as your debt-to-income ratio, or DTI. You'll also need cash reserves to cover your closing costs, as well as a down payment of some kind.

If you're doing well in these other areas, then a credit score of 720 should be good enough to get a mortgage. When you get closer to the actual house-hunting process, you might want to sit down with a lender to get pre-approved for a loan. It's an easy way to find out where you stand, in terms of qualification.

Related articles:
Do I qualify for a mortgage loan in 2010?
FICO score needed to buy a house in 2010

I hope this answers your question about 720 being a good score. If you have other questions about this topic (or anything else related to home buying), try using the search tool at the top of this website. There are literally hundreds of articles on this site, so you're bound to learn something.

Good luck with your 2010 home buying process. I hope everything works out well.

Can Bankruptcy Stop a Foreclosure from Happening?

Question: "You probably get this question a lot, but I was wondering if bankruptcy can stop foreclosure from happening?"

Unfortunately, you're right. We do get this question a lot. That's just the current state of the economy, I'm afraid. It probably doesn't make you feel any better, but you're certainly not alone in wondering about this. So let's answer this question for the benefit of all readers, shall we?

The short answer is "temporarily." Here's the long answer:

A bankruptcy filing can temporarily stop a foreclosure from taking place. Basically, it prevents the lender from foreclosing on the home until they get permission from the courts. Remember, bankruptcy is a legal proceeding handled through the courts. So the mortgage company must get permission (usually from a judge) before they can foreclose on the property.

This is referred to as an automatic stay, in legal terms. Soon after you file for personal bankruptcy, the automatic stay will be initiated. This prevents lenders / creditors from taking actions against you (like suing you or foreclosing on a home) unless they get permission from the courts first. If the judge lifts the stay for the lender, they'll be able to move forward with the foreclosure process. Does that make sense?

If you continue to default on your payments, the foreclosure will eventually take place. Then you'll have a bankruptcy filing on your credit, as well as a foreclosure. Those things can follow you for years, and they do serious damage to your credit score. It can take a lot of work to repair this kind of damage. I realize that sometimes you just don't have a choice. I just want you to understand the repercussions of all this.

Some people think they can declare bankruptcy in order to "buy time," after which they will get back on track with their mortgage payments. This is a risky strategy with serious consequences, and it might not even work. Once the foreclosure paperwork has been filed, you would have to come to some kind of agreement with them, to stop the process. At this point, they won't listen to much -- aside from a lump-sum payment for all your missed payments.

Note: I am not a bankruptcy attorney, so don't take this as gospel. Every situation is different, and different lenders behave in different ways. I recommend speaking to housing counselor, if you think you might be foreclosed on. They can help you understand your options, and possibly help you avoid foreclosure altogether. You can find a list of HUD-approved housing counselors at the HUD.gov website.

This answers the question: Can bankruptcy stop foreclosure from taking place? If you have other questions about credit-related topics like this try using the search tool at the top of this page.