Credit Card Collection Agencies and Negotiating Settlements

Posted by Mark Newman

January 7, 2010

Due to the difficult financial climate we live in, collection agencies which collect credit card debt have become busier. This is due mainly because it has become harder and harder for people to make their payments.

Typically, the problem begins with one missed payment. This missed payment will likely mean that you are assessed a late penalty, which in turn might mean that you exceed your credit limit. When this happens you are assessed another penalty because of the credit limit overage. Now, you may be $100 or so over your credit limit and you still haven’t paid your monthly minimum payment.

Before things get worse, it is best to contact your credit card provider and explain your situation. Most credit card providers are willing to work with you. It is best to put a stop to things at this point instead of letting things get out-of-hand, resulting in the credit card provider selling your debt to a credit card collection agency.

If the credit card provider decides to sell your debt to a collection agency, normally at cents on the dollar, the credit card collection agency will want to collect from you as much as possible since this is how they make their living. Because of this, credit card collection agencies may be nasty with you and threaten court action.

However, launching a court case is costly and time-consuming so most collection agencies would prefer to make arrangements with you for payment of the debt. If you can swing it, make an offer to the collection company to settle the debt in full and negotiate a reduced amount. If you decide to do this, make sure that all negotiations are in writing, keep copies of all correspondence to and from the credit card collection agency, and send all correspondence via certified mail, return receipt requested.

Typically, it is a good idea to begin the negotiation somewhere around 25% of the original balance. Though this sounds low, remember that the collection company probably purchased your entire debt at only about 10% of the original amount. It is likely that the collection company will decline this offer and will issue a counteroffer, which you then should counter as well. This will continue until you either come to an agreement or the negotiations discontinue.

Alternately, the credit card collection agency may lose interest in your debt and decide to accept less than it had been hoping to receive. It could also be that the credit card collection agency will decide to sell your debt to another credit card collection agency. This debt will be sold again at a reduced rate. This new credit card collection agency will contact you and the process will begin all over again.

At any point in this drawn out process, a court action could be filed against you. From beginning to end, your credit score will suffer tremendously; however, a court judgment will send your credit score into a downward spiral.

Stop Midland Credit . Free 19 Page Collection Agency Deletion Guide at www.MidlandCreditDebt.com

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