The Mortgage Brothers Show

Mistakes to Avoid When Dealing with Debt Collectors


In this episode we discuss how past due or delinquent accounts can quickly be turned over to a collections department or agency that will then become responsible for collecting the debt. Debt collectors can be intimidating to consumers, especially when their attempts to collect a debt lead to daily calls, emails, letters, and text messages. The idea of facing off with debt collectors can be overwhelming, but knowing what mistakes to avoid when dealing with debt collectors can be beneficial to consumers.


*The following transcript has been edited for clarity.

Eddie Knoell — I’m Eddie Knoell.

Tom Knoell — And I’m Tom Knoell.

Eddie — Welcome everyone. This is the Mortgage Brothers Show. We are almost at one full year of our weekly podcast so we’re excited. I’m really thrilled about that and today we’re bringing another, I think, great topic about debt. About debt collectors and things that you should do. Things that you should be aware of.

Tom — Yeah, debt collectors. It’s like that boogeyman dream. Every once in a while they pop up and you just don’t know what to do with them. It’s like, oh man. I don’t know if you had a scary dream as a kid. Mine was always on a pirate ship. For some reason, I don’t know if it was some movie, but when things really got bad for me in my dreams, it was a pirate ship.

Eddie — A pirate ship.

Tom — Oh, yeah.

Eddie — It was some Pirates of the Caribbean.

Tom — Right.

Eddie — Old version.

Tom — Yeah, that’s right. Because it’s-

Eddie — The Swiss Family Robinson pirates.

Tom — Maybe it was actually that. But yeah, so even just saying the word debt collector, it still kind of makes my skin jump kind of like the boogeyman dreams did or the pirate dreams did. But I think we all go through them.

Eddie — Yeah. And I think that there are a lot of mistakes that people make and there’s ways to avoid them. That’s what we’re going to be talking about. How about, Tommy just talk about item number one. I mean obviously these debtors are calling you.

Tom — Yeah. So we’re not going to get into-

Eddie — Not calling you, but…

Tom — But they could. That’s right. That’s right. I know that we had a medical bill, could we have a couple of kids and you get a transfusion or some type of very technical thing in the hospital and the hospital doesn’t do it, but a contractor within the hospital does it. And then you realize it’s a contractor for the contractor in the hospital and there’s this bill that’s been sitting out there. And you’re like, “Where did this thing come from? I pay all my bills. I have 800 credit score or whatever, 790. Where did this come from?”

Tom — So yes, I actually have received a call from a debtor and I would always get nervous. So yes. So this is just on how the consumer responds to the actual debt collector situation. We’re not going to get into how the collections affect the credit scores, just debtors calling you or creditors calling you.

Eddie — Okay, so what are the tips about the phone calls and the letters that they get.

Tom — Yeah. So do you have to take their calls? The simple answer is no. You can send them a letter. I actually put something in writing that tells them, “Listen, we wish not to be contacted. You’re infringing upon our rights. Do not contact us.” And they are obligated to listen to that. Though, they will still reach out to you when it comes to giving you updates on legal statuses or legal situations. Like if something gets moved up to the courts, they still have the right to inform you of that. But in terms of that constant barragement of, “Where’s my money, where’s my money?” You can tell them to stop. And you’re not doing anything wrong with that.

EddieYou can tell them to stop calling you?

TomJust stop calling us and they will not be allowed to call you.

Eddie — Okay. So they have to put you on like a list that basically they don’t call.

Tom — Correct.

Eddie — Do not call us. Okay.

Tom — Correct. They can still send you correspondence, but that would be just legal updates as to where your account sits.

Eddie — Yeah. Well, I know a lot of people talk about the aggressive actions that debt collectors make. There are certain, I think rights that consumers have.

Tom — Right.

Eddie — Debt collectors have to be very careful that they don’t do certain things. So how about just helping people inform them what their rights are. What are their rights?

Tom — Yeah. So part of the rights are going to be that they can’t call at all hours of the night. They can’t call while you’re drinking coffee at 5:00 AM. So between 8:00 AM and 9:00 PM they are allowed as long as you’ve not put them on that do not call list so to speak. That they can reach you during those hours, but they are not allowed to reach you before or after those hours.

Eddie — Okay.

Tom — Let’s see some of the other ones. They can’t contact you after you’ve sent them that cease notice, that leave me alone notice. Again, they can still send you correspondence, but they should not be contacting you again, giving you threatening demands and whatnot.

Eddie — Okay.

Tom — And that kind of leads into the last one is they really cannot threaten in any way. So that’s a big thing that I think a lot of people are real afraid of because they will come across as intimidating. “Well, this is what’s going to happen to you if you don’t do such and such.”

Eddie — Right. Somehow we’re going to garnish your wages, we’re going to go after you through the… We’re going to use the federal law and the government or the police. I mean, none of that should be happening.

Tom — That’s right. And they also need to make very clear on what their identity is. Who they work for. Maybe an employee number. And again, they should not be coming across as threatening and intimidating.

Eddie — Okay. Now that all makes sense. And how about… What’s the next item here? Some of these things could be scam. How do we know that the debtor owns this debt? How do you know it’s really yours?

Tom — So I remember after college, I graduated, was super excited, got my diploma and a year and a half later I think I looked at buying a car and a tuxedo bill came up. I’m like, “Tuxedo?” And it actually turned out to be a wedding that I was in, in college and I turned the tuxedo in. I know I did. Anyway, the actual tuxedo owner said I had never turned it in. So there was like a $400 charge for me.

Eddie — Wow!

Tom — That was something that I think I ended up having to pay just because I didn’t want him to bother me. But I guess my point is, is make sure that that debt is actually yours. If it says that there were an expensive flower arrangement ordered in Ohio and you’ve never stepped foot in Ohio, I mean, there’s a pretty good chance that it’s not yours. So there’s nothing wrong with you confirming that you are in fact the debtor, that it’s got your name on it, you’re familiar with what the transaction was, et cetera.

Eddie — Okay. Now what about making payments? What about telling them to make payments and what about asking them to basically remove… I mean, this is a two-part question. What about settling for an amount or asking them to remove it all together?

Tom — Right. So you can negotiate with them that they basically purchase the debt for a percentage. And so anything over that percentage they’re actually making, which they’re entitled to make a profit. They have people calling you.

Eddie — Yeah, I heard some statistic that they buy the debt for about 10 cents on the dollar or so. If you’ve $100 medical bill, they bought it for 10 bucks.

Tom — I mean that kind of makes sense. I don’t know what their conversion rate is, but you think if they can collect what, maybe 20%, 30% of all the bills that they get.

Eddie — And the fact that these things are reported on the credit… Yeah, I don’t know. I haven’t seen a statistic on how successful they are getting them. They’re motivated. I mean, half off still makes them profit.

Tom — It still makes them profit. That’s right. So you’re in a negotiating position and I think there’s really two schools of thought. One is, do you owe the debt? Is the debt legitimate? Is it justified? Did you sign up for it and did you get the services or the material that you wanted? If that’s the case, you don’t have to automatically have your negotiation hat on. “I’m going to ask for a discount.” Now, if you’re that discount person, you can do that. But I remember a good friend of mine told me, “Hey, if you owe the debt, pay it.”

Eddie — You’re bringing up something that has to do with just kind of the character of people. There are folks who just, even if it’s totally legit, they’re all about, I would say, screwing the man. If they think the debtor is kind of this enemy-

Tom — Right. Right.

Eddie — And that’s not right. But to your point, I think…

Tom — Yeah, so we’re not saying you have to pay every debt 100%, but we’re just throwing that out there as that is something to consider from, I guess, an agreement standpoint. A gentleman’s agreement, a woman’s agreement, did you get what you paid for? Now the other end of it is it didn’t turn out the way I wanted it to. They charged me too much. And it is not a justifiable debt, but I want this removed. I want to get past this. So that’s when you get to the negotiation table and say, “Okay, I know you say that I owe you $1,200, but why don’t we agree on X?” So, you can do that.

Eddie — Yeah. And we have been experiencing this. If you ask the collection company and you say, “I will pay you X,” give him half off. If the debt’s $1,000, offer him $500. “I will pay that today in exchange for you removing that from the bureaus.”

Tom — That’s right.

Eddie — “Remove it from the bureaus.” That’s a part of negotiations, it’s a part of the settlement agreement I think.

Tom — Right. Right. So there’s a monetary negotiation and then there’s actually a credit negotiation. So you can get into both of those. And then I would just say lastly, get that in writing. If they say, “Well, we can’t provide that for you until you pay it,” that’s ridiculous. All their letter would say is if X person pays Y amount to the creditor, the account will be paid in full.

Eddie — Yeah.

Tom — That’s all it’s saying. So don’t let anyone tell you, “Well, you have to pay it first before you get that letter.”

Eddie — Collection companies are very different one from the other. Some of them will say no, they won’t provide anything in writing. So you’re kind of going at it at your own risk.

Tom — Yeah.

Eddie — But if you have someone on the line saying that they’ll remove it and you’re willing to at least settle, it’s probably worth the risk. But…

Tom — And I’ll throw this out and I used to use this in terms of buying a car. Like, you never knew when the dealership gave you the best deal. And the only time you know when a dealership gives you the best deal is when they literally let you walk out the door. So if you’re haggling, haggling and you say, “Okay, my top dollar’s 21,000,” and they say, “Thanks, but no thanks.” And they literally let you walk out the door, then you turn around and go back in and you can agree to pay for maybe their last offer back to you.

Eddie — All right.

Tom — But that’s when you know. So you could, in this situation, even if they say no, at least you know maybe what their bottom is and then you’d come up a little bit.

Eddie — You’re right. Good point. Well, I think this is a good episode for all those people who have those questions about how to handle debt collectors. So if you have any questions, let Tom or I know. And Tom, anything else?

Tom — Yeah, let’s call it a day.

Eddie — All right, everyone take care. Have a good week.

Tom — All right folks, take care.

Eddie — Hey guys, thanks for listening to the Mortgage Brothers Show. Please let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to or yours truly at And be sure to ask us for a free quote on your next mortgage. Tom and I will personally work with you and help you through the whole process.

Signature Home Loans, LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Signature Home Loans, NMLS 1007154, NMLS number 210917, and 1618695, Equal Housing Lender.