Can a bill collector tack on additional fees to the original debt owed?

Posts Tagged ‘bill collectors’

Can a bill collector tack on additional fees to the original debt owed?

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Question: I have an outstanding debt of $750 with a college which is currently handled by a collection agency. The agency is telling me my debt is now $1,000. Is it legal for the debt collector to add fees and refuse to settle for my original amount?

Answer: What debt collectors can and can’t do sometimes depends on the laws of your own state, as well as the types of debts in question. For example, debt collectors can’t legally do anything to you (such as sue you in court or get a judgment against you) once the statute of limitations has expired on a credit card debt. But with student loans, there is no statue of limitations, so bill collectors can pursue you forever over those debts. I assume your debt fits into the latter category, since you said your $750 bill was with a college.

Federal law prohibits debt collectors from charging you any thing above the amount you actually owe, unless that’s permitted by the laws of your own state or the terms of your original agreement with your creditor. You said you signed no such contract with your creditor. Double-check the fine print of any agreement or paperwork you have. There are often clauses that give creditors or bill collectors the right to impose additional “collection” costs on borrowers. The federal Fair Debt Collection Practices Act is the national law that governs bill collectors. This law is enforced by the Federal Trade Commission, so if you have any complaints about a debt collector, reach out to the FTC (http://www.ftc.gov).

Also, although there is no federal requirement that collection agents be licensed or registered, many states to require this. Check the laws in your state and see if they require debt collection agencies to be licensed or bonded. A good place to start is this document from the PrivacyRights.org. If your state isn’t on the list, contact your state Attorney General via the National Association of Attorneys General (http://www.naag.org). Ask for the collection agency to show you in writing that it’s licensed and put everything else in writing too, as opposed to just calling you on the phone and demanding payment.

How can I get my credit file updated?

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Author: The Money Coach

Q: My Credit File Has a BofA Charge Off for $525. The High Balance Says It was $1,928 But I Never Had That Kind of Balance So I Disputed It and It Came Bank “Will Remain.” BofA Sold it to Hudson and Keys Collection Agency. Now They Say They Will Accept $800 of the $1,928. I Feel They Should Update My Credit File with the Current Lender and Negotiate the $525 Written Off. How do I Make That Happen?

A: Well, under the Fair Credit Reporting Act, the original lender is the one that is supposed to be noted on your credit report because that’s the creditor with whom you had a deal. Credit card companies and banks do have the right to sell uncollectable debts to bill collectors, and that is apparently what’s happened in your case. In fact, the debt appears to have been sold multiple times. I don’t think you’ll ever be able to get a credit reporting agency to change the creditor listed. But that shouldn’t really worry you because, frankly, it has absolutely no impact whatsoever on your credit rating or your credit score. Focus instead on the $525 debt that you’re trying to get cleared – or the $800 they’re trying to get you to cough up. Read this column and this one too about how to negotiate with bill collectors.

Key Differences Between Equifax, Experian and TransUnion Credit Reports (askamoneyexpert.com)
What’s the Best Way to Get Negative Information Removed From My Credit Report (askamoneyexpert.com)

I Received a Letter Fron a Collection Agency for a Past Due Debt. Has This Account Already Been Reported on My Credit Report

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Author: The Money Coach

Q: I Received a Letter Fron a Collection Agency for a Past Due Debt. Has This Account Already Been Reported on My Credit or Will It Be After My 30 Days to Respond is Up? Also, is It Better to Pay the Creditor or Agency Directly?

A: If you are already more than 30 days delinquent in paying a debt such as a credit card bill, chances are the account has already been reported to the three main credit bureaus: TransUnion, Experian and Equifax. But you don’t have to do any guesswork about this. Nor do you have to take the collection agency at its word — regardless of whether or not it’s saying the report has been reported or hasn’t been reported. There’s a sure-fire way to know what’s on your credit report. It’s simply by taking advantage of your rights to get a free copy of your credit files from each of the “Big 3″ credit bureaus I previously mentioned. Just go online and get your credit reports and see for yourself. Look particularly closely at any records for “collections” or “public accounts.”

To get your free credit files, just go to: http://www.AnnualCreditReport.com.

Regarding your other question, I think it’s usually faster, easier and sometimes less financially costly to deal directly with creditors — as opposed to collection agencies. Those bill collectors often tack on additional fees, penalties, and other charges – expenses your creditors may be willing to waive.

Key Differences Between Equifax, Experian and TransUnion Credit Reports (askthemoneycoach.com)

My Car Was Repossessed but the Collection Agency Still Wants More Money to Settle the Debt. Help!

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Author: The Money Coach

Question:

I have a question from a reader today who wanted to get some information about an auto that was actually repossessed via voluntary relinquishment. He wrote to me saying, “I’m recently divorced, and my ex decided to voluntarily relinquish a car that was in both of our names just before our divorce was final. I got a letter from a collection agency demanding more than the car was originally worth. The divorce papers state we’re equally responsible, but I know she’ll never pay because she can’t even pay child support.” He said he has custody of his child and can’t afford to pay anything at this time without some help from her in terms of keeping up with all of his other bills. So his question really boiled down to this. He said, “I pulled my credit report, and it shows the repo, but it also shows an amount on the report that is less than a quarter of what the agency is demanding. Can I use this information as a bargaining tool to get them to settle?” He also mentioned he was told to file bankruptcy, but he’d already done that back in 2005.

Answer:

First off, no, don’t think about filing bankruptcy just due to a car loan that was in both your and your ex‑wife’s name, even though the amount owed might be considerable relative to your income. What I think you should do is, yes, by all means, try to negotiate with the collection agency that has reached out to you, and let them know, in no uncertain terms, that you are cash‑strapped, that you are a single father, that you’re raising your child on your own, and that the amount that was due, obviously, you’re aware of the fact that it’s legally your responsibility and your ex’s, but that they’re asking for a multiple of what is the amount that the car was actually worth and three to four times what’s actually shown on your credit report.

Don’t be afraid to let them know that you have seen your credit report recently and that you know that there’s a huge difference in terms of the amount that they’re trying to demand and the amount that’s shown on your credit report. I would suspect that this will be a huge point of leverage to use in the course of your negotiations, because a lot of times collection agencies try to say, “Look, we’ll ruin your credit. We’ll put something on your credit report.” And your defense to that is, “Hey, the information is already there. It’s already showing up on my credit report. I’m merely trying to clear up the matter.”

What I would suggest that you do, in terms of offering a settlement amount, is either try to pay a lump sum and get it all done and over with in one fell swoop, or only commit to a monthly amount that is modest and firmly within your reach in terms of paying every single month without fail. I don’t like the idea of a monthly payment plan to pay off an old collection account, especially for a repossessed car that you’re not getting any value out of, as much as I like the idea of doing a lump sum.

If you negotiate a lump‑sum payment to pay off X amount and get this debt taken care of once and for all, try to get something called a PFD, or a pay for deletion. That’s where you agree to terms with the collection agency about an amount that will settle up the past‑due bill, and that amount will be considered acceptance of payment in full. In exchange for you making that cash payment, the collection agency will agree to delete all negative information from your credit reports, that is, from your Equifax, Experian, and TransUnion credit reports. They won’t always agree to this, but you should certainly ask for it.

If you can get them to do this and to agree to that, make sure you get a letter in writing from the collection agency, upfront, before you turn over any money. That letter would be proof that you might need later if they don’t hold up their end of the deal and if you have to go to the credit bureau and dispute the information and say, “This was supposed to have been deleted from my report because I paid it per an agreement between myself and the collection agency.”

So I hope this information helps you. Good luck raising your child.

What’s the Best Way to Get Negative Information Removed From My Credit Report (askamoneyexpert.com)
Key Differences Between Equifax, Experian and TransUnion Credit Reports (askthemoneycoach.com)

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Posts Tagged ‘bill collectors’