Negotiate confidently the next time you pick up that early-morning call.
If you totally turn your back on your credit card dues, there will come a time that you will just stop receiving bills from your card issuer. This is a sign that your account is no longer in the hands of the bank; it has been turned over to collection agencies. And these collection agencies will do anything in their power to collect money from you.
Due to the nature of their work, collection agents have been getting a bad rap for often resorting to intimidation tactics. That’s just their way of coercing people into paying their remaining balance. To them, they’re only doing their jobs. But to you, it’s harassment that’s seriously affecting your daily function.
Well, guess what—no matter how high your debt is, the law stays on your side. At least if you really do intend to pay your dues in time. All it takes is arming yourself with the proper knowledge to avoid these credit collection traps.
1. No, you won’t go to jail because of debt.
Afraid that your debt will get you in jail? Don’t be. Well, not unless you’ve signed a contract with the collection agency. According to a financial adviser and blogger Fitz Villafuerte, no one has gone to jail for failure to pay their credit card debt. “Incurring debt is not considered a criminal act,” he writes on his blog. “Of course, this is assuming that you just simply failed to pay your credit card debts for whatever reason.” Be reminded, however, that signing a contract with the agency can serve as grounds for legal action.
2. …but your credit history will be badly affected.
All your financial activity will reflect on your credit history. Loan repayments, credit card use, late payment of bills—these are all collected and factored in by credit report companies. Once your account reaches the hands of the collection agency, it’s safe to say that your credit score has already dipped. “It will be difficult for you to get a personal loan when you need one,” says Villafuerte. “Aside from that, some companies do check the credit history of their job applicants so a bad credit history may affect you if you’re looking for employment.
3. Even if you pay your debt, your negative record won’t go away easily.
So you were able to settle the full amount that the collection agent asked you to pay. You may be wondering if you can get a new credit card or apply for a loan in the future. Unfortunately, not—or at least not immediately. Your non-repayment is still in the system and it will stay there for a very long time.
4. But it’s not like there’s nothing you can do about it.
Alex Ilagan, Credit Card Association of the Philippines executive director, says that while a bad credit score may stay for years, a certificate of full payment will allow people who defaulted to get back on their feet. “Most people would really not understand that if they default on something today, that could affect their ability to borrow money in the future, he told ANC’s On the Money. “There’s a lot of education to be done.”
5. You can confirm the identity of the collection agent.
Most agents will tell you outright that they’re calling on behalf of so-and-so law office. But others still lie about their affiliation and give you the impression that they work directly with the banks. Well, there’s only one way to find out—and that’s by calling the credit card issuer and asking them for the name and company of the agent you’re transacting with.
6. Collection agencies “buy” your account from the banks.
“The collection agency is not a part of the bank,” says Villafuerte. “They are a third-party business [that] buys the delinquent accounts. The collection agency will now take over the responsibility of convincing you to pay your credit card debt. Whatever they collect from you becomes their profit.”
7. You can report collection agents/agencies that resort to offensive practices.
The Bangko Sentral ng Pilipinas prohibits collection malpractices, and agencies found guilty of doing such can be reprimanded by the law. Under BSP Circular No. 454 Series 2004, the following are credit collection no-nos:
a) The use or threat of violence or other criminal means to harm the physical person, reputation, or property of any person;
b) The use of obscenities, insults, or profane language which amount to a criminal act or offense under applicable laws;
c) Disclosure of the names of credit cardholders who allegedly refuse to pay debts, except under conditions stated here;
d) Threat to take any action that cannot legally be taken;
e) Communicating or threat to communicate to any person credit information which is known to be false, including failure to communicate that a debt is being disputed;
f) Any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a cardholder; and
g) Making contact at unreasonable/inconvenient times or hours which shall be defined as contact before 6:00 a.m. or after 10:00 p.m., unless the account is past due for more than sixty (60) days or the cardholder has given express permission or said times are the only reasonable or convenient opportunities for contact.
If the collection agencies use these methods on you, you may report them to the BSP Financial Consumer Protection Department at 708-7087 or firstname.lastname@example.org. –Dino Mari Testa