All Insurance Professionals

Consumers that are dealing with constant calls from collection agencies probably want nothing more than for those calls to stop. Unfortunately, forcing collection agencies to cease contact may actually do more harm than good.

One thing that attracts many consumers to certain debt settlement agencies and people who intend to settle your own credit card debt is the fact that they promise to stop collection calls. Since these calls are annoying, stressful, and disruptive, many consumers are desperate for them to stop. The problem with these agencies is the way they get collectors to stop calling.

Many agencies stop persistent collectors by issuing them a “Cease and Desist” letter. A “Cease and Desist” letter is one that asks the collection agency to cease all contact with the consumer. Thanks to the Fair Debt Collection Practices Act, collectors are required by law to stop contact after receiving this letter. This means no more phone calls at work, at home, or to the consumer’s cell phone. Once a debtor enrolls in a debt settlement service, many agencies will quickly send one of these letters to each of a consumer’s debt collectors. While this sounds beneficial, it can actually be a bad thing.

Once a collection agency receives a “Cease and Desist”, they are forced to stop pursuing an account. However, if they do not recover payment from the debtor, they will end up losing money from the account. Most collection agencies will not just sit back and admit defeat. Once a collector receives the request to cease contact, they will contact the original creditor to let them know that they can no longer pursue the account.

The original creditor may then do one of three things. They may hire another collection agency in hopes of recovering the debt, they may sell the debt to an agency that purchases outstanding accounts, or they can sue the consumer. The problem is that, in this situation, legal action makes the most sense.

If the creditor decides to sue, the consumer will be forced to pay the debt in full. If the creditor sells the debt to a third party collector, they must sell the debt for much less than its worth. Consumers that can’t afford to pay their bills certainly can’t afford to pay expensive court costs on top of their bill. Therefore, hiring a settlement agency that promises to stop collectors from calling may actually be a very bad idea after all.