Knowing the rules governing debt collection practices can offer guidance if you've been contacted by a collection agency. Collection agencies who operate outside the law can face fines or sanctions. Understanding what they can and cannot do when seeking debt settlement can help you alleviate some of the trauma involved. Here's some of the rules of the game.

Cease and Desist Order

If a debt collector contacts you in regard to an an account sent to collection, you can tell them to stop all communications with you and to go through your lawyer instead who must respond to their efforts. By law, the agency must immediately stop contacting you, except to inform you that either all collection efforts have been canceled or to inform you that you are being sued. Another option you have is to tell them that you want to negotiate with the original creditor instead, and then revisit that avenue.

Intent to Follow Through

When a collection agency tells you it's planning to sue you, it must actually intend to do so. They cannot just threaten to sue you for intimidation purposes and not follow through. Federal laws protect you from this kind of coercive action and you should report it immediately to either your state attorney general or the Federal Trade Commission (FTC).

Proof of Debt

When dealing with collection agencies you can request a validation notice from them, clearly stating your financial obligations - to whom and how much. This could buy you a little time to either settle the dispute or come up with the money. The collection agency then has five days in which to verify it is authorized to collect on this debt and verify your liability.

If, once you receive proof of your debt, you think the facts are wrong, you must send the collection agency evidence of the error by certified mail within 30 days of its receipt. If you don't dispute the facts at this time, the collection agency will assume the debt is valid and continue to pursue action against you.

One more option for postponement is available after you receive the validation notice. You have thirty days in which to request further written proof of any judgment on which the claim is based, as well as the name and address of the original creditor. Your attorney can help you navigate these options.

A collection agency must stop efforts to collect on any and all debt in dispute until it mails you the requested information. If the collection agency doesn't follow this protocol, you need to contact the FTC or your state attorney general. Don't assume that everything will resolve itself, even if you are right. If the collection agency pursues action against you, you could still end up with a judgment against you.

Make Them Play Fair

Collection agencies are bound by certain federal rules when doing their job. If you find yourself on the receiving end of their collection activities and feel you are being mistreated, you should seek government intervention to hold them accountable. Such actions can stall the process long enough for you to work out an equitable arrangement with your creditor. Get all promises in writing, including a provision to strike all negative related items from your credit report and your debt is paid in full.

If you find yourself in a situation where you need to settle a debt with a collection agency, it's important to know the rules. Understanding the process can save you a lot of hassle and possibly even save some money and help repair your credit.