How do I negotiate a settlement with a debt collector? | Consumer Financial Protection Bureau (2024)

FAQs

What percentage should I offer to settle debt with a collection agency? ›

What Percentage Should You Offer to Settle Debt? Consider starting debt settlement negotiations by offering to pay a lump sum of 25% or 30% of your outstanding balance in exchange for debt forgiveness. However, expect the creditor to counter with a request for a greater amount.

Some of these factors include the time since your last payment, the total amount owed, whether your account is with the original creditor or a collections agency, and how much you can afford to pay. Typically, you should offer 60% or less of your debt amount to kick off negotiations.

“As for the negotiations, be persistent and persuasive,” Schwab says. “Write down your arguments beforehand and make them sympathetic to your case.” Share any truthful reasons you may be having a hard time and show that you want to pay as much debt as you can.

The American Fair Credit Counsel reports the average settlement amount is 48% of the balance. Again, start low, knowing the debt collector will start high. With the evidence of your budget at your elbow, be prepared to describe the reasons you're unable to be squeezed for anything close the full amount.

In some cases, you may be able to settle for much less than that 48% average. Collectors holding old debts may be willing to settle for 20% or even less. The statute of limitations clock starts from the date the debt first became delinquent.

It's generally a good idea to start with a lower offer than you're willing to pay. This will leave room for negotiations. If your creditor won't accept your settlement offer, ask about a payment plan. Consider payment plans that would work for you in case the creditor offers something different from what you propose.

Tips to Negotiate with Creditors on Your Own. It is possible to negotiate directly with creditors and settle your debt for less than you owe, but you may want the help of a professional. A quick counseling session from a certified credit counselor can help you discover your options and choose the right path forward.

Identify, gather and produce the most important information early. Settlement negotiations are most effective at the proverbial sweet spot, when each side has the information it believes it needs to make a judgment about settlement but before discovery expenses allow the sunk costs mentality to take hold.

What if a debt collector won't negotiate? ›

If your creditor refuses to negotiate, or won't negotiate, it's in your best interest to get help. There are many other ways creditors can legally collect money that they're owed, and you shouldn't put yourself in an emotionally damaging situation trying to work through the debt negotiation process alone.

What is a reasonable Full & Final Settlement Offer? There is no set figure that constitutes a reasonable offer because it entirely depends on your financial situation, and the creditor. Very low offers may be rejected but if you can offer a significant portion of the money you owe, it is more likely to be considered.

Depending on the situation, debt settlement offers might range from 10% to 80% of what you owe.

Typically, a creditor will agree to accept 40% to 50% of the debt you owe, although it could be as much as 80%, depending on whether you're dealing with a debt collector or the original creditor. In either case, your first lump-sum offer should be well below the 40% to 50% range to provide some room for negotiation.

Some want 75%–80% of what you owe. Others will take 50%, while others might settle for one-third or less. If you can afford it, proposing a lump-sum settlement is generally the best option—and the one most collectors will readily agree to.

Credit card companies may settle for anywhere from 10% to 50% of the amount owed. It depends on several factors, including the credit card company and how delinquent the balance is.

According to recent statistics, the average success rate for debt collection agencies in the United States is around 20-30%. Therefore, it is reasonable to estimate that a typical debt collection agency will recover an average of $20-30 for every $100 in outstanding debt.