Financial literacy: What to do when faced with debt collection

Published: Tuesday, July 16 2013 9:10 a.m. MDT

Jessie Paige sits with her dog, Dakota, as she looks through her mail at her home in Salt Lake City on Monday, April 29, 2013.

Ravell Call, Deseret News

SALT LAKE CITY — Jessie Paige had spent her life being financially responsible, paying her bills on time and staying out of major debt.

The 28-year-old even worked her way to homeownership in late 2010 and was “living the dream.” Then a nightmare twist of fate put her finances — and consequently her life — in a tailspin that she is still struggling to get out of.

Paige had her identity stolen about a month after she closed on her first home near downtown in October 2010.

“I have several credit cards in my name, and I still can’t get them off,” she said of credit cards created that she had no knowlege of. “I’ve been fighting them and fighting them … and I’m at the point that I’m filing bankruptcy just to get rid of the credit cards and accounts that were (illegally) opened in my name.”

The ID thief even opened an account at the Salt Lake City Library in Paige's name, using a phony address, and checked out $600 in books that were never returned.

Prior to the ID breach, Paige said her credit score was in the mid-700s. It dropped to the low 500s.

As the situation began to unfold, Paige said she would receive menacing calls from aggressive debt collectors demanding that she pay bills that were mounting.

“I would get three or four calls a day,” she said. “They would also call my work.”

Despite ongoing dialogue and submission of documentation explaining the situation, the calls kept coming, she said. To make matters worse, she was laid off from her job, making an already challenging situation virtually intolerable.

Frustrated and overwhelmed, Paige eventually contacted a local credit counselor who was able to help her tackle the problem and stop the harassing calls.

While Paige’s experience became extreme, managing money can be a challenge and there are ways to deal with debt collection without it becoming an overwhelming experience. In most circumstances, debt problems that are properly managed can be resolved without acrimony.

Will VanderToolen, director of counseling at at AAA Fair Credit Foundation, a nonprofit credit counseling agency in Salt Lake City, said among the first steps consumers should take when confronting debt collectors is to figure out the source of the debt, then contact the original creditor to determine if it is a legitimate claim.

“If it’s valid, step two is to determine what type of payment arrangement or agreement you can come to,” VanderToolen explained.

The reason consumers wind up in debt are varied, he said. Some are poor money managers, while others have experienced personal issues such as losing a job or having unexpected medical expenses that arise, putting them in financial dire straits.

“In some cases, these households have gone through some pretty drastic changes in income and have had an inability to meet their financial obligations,” VanderToolen said. “It’s not uncommon to have someone with many collection agencies calling all at once.”

While most debt collectors are professional and reasonable, he said, some can be aggressive and pose a problem with uncompromising tactics.

Fortunately, there are rules they must abide by, VanderToolen said. The Federal Trade Commission’s Fair Debt Collection Practices Act protects consumers.

“If an individual faces a situation in which they are receiving communications from a debt collector, they should become familiar with (the act),” he said.

Once a debt is sent to collections, consumers should immediately address the matter rather than procrastinate or ignore it, VanderToolen said.