Ask The Money Coach

Posts Tagged ‘collection agency’

Q:  A family member did something to my bank account where I owe them
money and I tried calling the bank to set up a payment arrangement
they never called me back and they sent it to a 3rd party collection
agency. What should I do:

A: Here is a response that we recently sent to another subscriber that was scammed by a family member.

bit.ly/9kWSts

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 (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 (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.

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: 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.

If you agree to a settlement with an original creditor or with a collection agency, they can do anything they want in terms of keeping information on your credit report, or deleting that information from your credit files. Collection agencies almost always try to claim that they “can’t legally” delete negative data from your credit records. That’s hogwash. You’ll have to push for this in your negotiations. But there’s no law that prevents them from deleting
negative marks from your credit files. Get an agreement in writing upfront before you agree to a settlement. Again, a collection agency may say: “We don’t write agreement letters.” So you may have to write it youself, submit it to them, and secure a signature from a representative at the collection agency. And Yes, and email or a fax can count as in writing. With a fax, just spell out the terms of the agreement and get the person’s signature. With an email, document your agreement and then ask the person to give you a reply email confirming the terms you’ve outlined.

Regarding the debt also appearing on your wife’s credit report, yes, it’s possible that that can occur and it could be perfectly legal. For instance, if your wife was a co-signer or authorized user on the account, the debt may show up on her credit report. Also, depending on the type of debt in question, she may be legally held responsible for your debts — particularly since you are in California, a community property state. Read this article for more tips on how to keep, for example, a spouse’s medical debt from impacting you and your credit.

askthemoneycoach.com/2010/01/can-i-be-held-responsible-for-medical-bills-my-ex-spouse-generated-she-was-covered-on-my-insurance-plan-we-just-signed-divorce-papers/

Lastly, If you settle an old debt, the collection agency should agree to delete the negative information from both of your credit reports.

Depending on the type of debt in question and what the creditor or collection agency does with the account, it is possible that paying an old debt could cause it to be either re-activated or put back on your credit report. Since you said the debts have “long since” been deleted from your credit reports, I assume that those debts are over seven years old. Sometimes when people repay such old debts, or workout payment plans on really old bills, a collection agency will “update” the “status” of the credit account. It may now show as “Paid Charge Off,” or “Paid Collection Account.” Neither of them will improve your credit rating — especially if the items were previously eliminated entirely from your credit files.

It is very admirable that you are conscientious enough to feel morally compelled to at least settle old debts. However, I would encourage you to leave those old accounts alone. The truth is that even though you did not repay the financial obligated you may have owed, you certain did pay another price: in terms of your credit rating, and those items previously being on your credit reports for at least seven years. Additionally, having negative items on your credit probably cost you dearly in other ways. You probably paid higher interest rates for everything where you had to borrow: mortgages, credit cards, auto loans, student loans, and so on.

Also, please recognize that we live in a society that doesn’t send people to jail for past due debts or punish them for life over past financial bills. There’s a reason – many good reasons, in fact — that there are legal limitations regarding how long creditors can pursue you in court or report negative information to the credit bureuas. Bottom line: don’t be so hard on yourself about those past old debts. Just resolve to do better in the future, and don’t allow yourself to be in a situation where you have other debts that you can’t afford to repay.