When you can’t pay your debt, most creditors go through a similar process to try to persuade you to pay. Selling your debt to a third-party collection agency is one of the tactics at their disposal.
When a collection agency buys a debt in full, the debtor is normally notified by phone or in writing by the new account owner (collector). Without your authorization, debt can be sold or transferred from one creditor or collector to another. It usually does not happen without your knowledge, though.
A consumer is required by law to obtain written notice (also known as a debt validation letter) within five days after the collector’s initial contact attempt. The amount of the debt, the original creditor to whom the obligation is owed, and a statement of your right to challenge the debt must all be included in that notice.
If you receive a debt validation letter, you should contact a non-profit consumer protection organization for assistance, as the collection procedure can be complicated and time-consuming. If a collector is unable to reach a suitable agreement with a customer after a few months, the debt may be bundled with others and sold to another collection agency. That process can be repeated indefinitely, even if the consumer’s debt has passed the statute of limitations.
Send a written dispute to the debt collection agency within 30 days after receiving the written notice of debt.
This sample dispute letter (PDF) can be used as a guide.
When you dispute a claim, the debt collector is required to cease all debt collection actions until you receive written confirmation of the debt.
You can also use the sample dispute letter to locate the original creditor’s name and address.
Keep a copy of the letter for your records, as you should with all dispute letters.
It’s also a good idea to send the letter certified mail, return receipt requested, so you can prove it was received by the debt collector.
(If certified mail is prohibitively expensive, at the very least obtain proof of mailing.)
For more information, contact your local post office.)
Why you should never pay a collection agency?
At first look, paying off a debt collection agency seems like a good idea. After all, isn’t it the simplest way to get them to leave you alone?
No, not at all. Sure, paying a debt collection agency can help you get rid of them. But that’ll be the extent of it. Your credit report will include evidence of the unpaid debt for additional seven years. It makes no difference how much money you owe. Whether the debt is for $100 or $100,000, collections raise the same red flag on your credit record. This may have an impact on your capacity to obtain loans in the future.
Worse, in debt collection cases, intent is irrelevant. Many debtors aren’t trying to avoid paying their bills. They simply aren’t aware that they owe money. This happens on a regular basis. An overdue debt notification may be sent to a borrower’s old address by a creditor. The borrower never receives it and goes on with their lives, completely oblivious that they are being pursued by a debt.
This lingering debt can have some unexpected consequences. It will be more difficult to obtain fresh loans as a result of this. With terrible credit, getting a loan for a car, a mortgage, student loans, or home improvements is much more difficult. That’s not all, though. It can be tough to rent a property or even get an internet streaming account if you have bad credit.
Paying a debt collection agency for an outstanding loan, on the other hand, can harm your credit score. Yes, you read that correctly. Even paying back loans might have a negative influence on your credit score if it appears on your credit report. If you have a debt that’s been outstanding for a year or two, it’s better for your credit report if you don’t pay it.
Do I have to pay a debt that has been sold?
“Do I have to pay if a debt is sold to another company?” many people wonder. You owe the money to the current company rather than the original creditor if your obligation is moved. The new collector must, however, follow all existing debt collection rules. Furthermore, the corporation cannot add interest or change any other conditions of your original contract that you did not agree to.
So, when is this going to happen? Is it possible for collection agencies to purchase from other collection agencies? Yes. Your original creditor will send your debt to a collection agency after it reaches a certain threshold, indicating that it is less likely to be paid. The collection agency may sell your debt to a debt buyer after a period of time.
If you do decide to pay off your debt, make sure you pay the party that is currently holding it.
Can I pay my original creditor instead of collection agency?
Money, they say, is what makes the world go ’round. This is especially true in the United States, since our economy is largely based on debt. In the United States, there is around $14 trillion in consumer debt. Debt is used by the typical American to purchase automobiles, homes, and even groceries.
Given those figures, it’s no surprise that one out of every three Americans has a debt in collections. So don’t feel bad about it. You’re not the only one who feels this way.
After the borrower misses a few payments, the debt is turned over to collections. It’s possible that the lender won’t be able to locate the borrower or that they’ll see it as a waste of money.
The initial lender has two options for recouping part of their losses. They can first hire a third-party agency to collect the debt on their behalf. They can also sell the debt in its entirety. In any case, the debt is no longer under the control of the original lender.
You may face harsh consequences if your debt is sent to collections. Your credit score will suffer as a result. Collectors will frequently bother you, demanding money you don’t have. Finally, if a debt is unpaid for an extended period of time, the collector may file a lawsuit against you to recoup the obligation.
Even if a debt has been sent to collections, you may be able to pay the original creditor rather than the collection agency. Contact the customer care department of the creditor. You might be able to explain your position and work out a payment plan with the bank. You can engage directly with the creditor to reclaim the debt from the collector.
There is, however, no legal requirement that the original creditor accept your request. Your best bet is to get in touch with them as soon as possible. Creditors are more ready to negotiate with you before expenses mount, which normally happens within six months of your debt being turned over to a collector.
How many times can a debt be sold?
Is it possible to sell a delinquent account to separate debt collectors multiple times? If that’s the case, how long will the bad account be on your credit report?
I have a delinquent account on my credit report that has been on there for seven years. It appears that another debt collector recently purchased the account, and it is now slated to stay on my credit record for another five years.
Is this a legal practice? Also, that particular debt collector has not contacted me via mail, but has sought to contact me via phone, which I have refused to accept because I require a written response from them.
Answer: Junk debt buyers can buy and sell an unpaid collection account over and over again. A junk debt buyer will frequently buy a collection account, try to collect for a few months, and then resell the account to another trash debt buyer. This can happen again and again until the loan is paid off.
However, no matter how many times a debt is re-sold among bad debt purchasers, the 7-year reporting term during which a delinquent account can remain on your credit reports should never change. If a debt collector Re-Ages an account, they have committed a major criminal act for which a consumer can file a lawsuit.
The Fair Credit Reporting Act requires a creditor reporting charged-off accounts to tell the credit bureaus of the MONTH and YEAR of the overdue account that immediately preceded the account being charged-off within 90 days of reporting the account. 180 days after that date, the 7-year reporting period begins. The original creditor or any debt collector who obtains the delinquent account CANNOT CHANGE the Compliance/Obsolescence Date.
In other words, not even an initial creditor’s sale or transfer of a charged-off account can change the permitted period for a credit bureau to record a delinquent account; hence, a debt collector cannot change the 7-year reporting period.
(Actually, it’s 7 years plus 180 days.)
What should you not say to debt collectors?
It’s also critical to keep track of what you shouldn’t discuss with debt collectors during the collection process. The following are three things you should never tell a debt collector:
Never Give Them Your Personal Information
The agent will request personal information in order to verify your identity and debt ownership.
You are not required to respond to these questions. Instead, request that the agent exclusively communicate with you by email.
Never Admit That The Debt Is Yours
There’s no reason to do this, and it could get you in hot water later if you try to dispute the amount as erroneous on your credit report.
Many old debts have bogus interest charges that you aren’t required to pay, but debt collectors will try to collect nevertheless.
It’s advisable to hang up after telling the collection agent to provide you the information in writing. You have the legal right to do so, and we’ll get to that in a moment.
Never Provide Bank Account Information
While you’re on the phone with a debt collector, they’ll try to persuade you to make a payment, even if it’s a tiny one. To complete the transaction, the agent will need your bank account or credit card details. It may appear to be a simple and quick way to end the call and get off the phone. However, this can lead to a number of serious issues:
- You Lose Leverage: Your payment is your leverage when it comes to dealing with debt collectors in the future. So don’t pay too soon and lose your most valuable bargaining chip. Save it for a time when you can receive something in exchange, such as requesting that the creditor delete unfavorable items from your credit report in exchange for a payment.
- You Share Account Information: The agent may claim that he or she will not keep your bank account or credit card information on file. You, on the other hand, have no way of knowing whether or not this is true. Additionally, debt collectors have charged you more than you committed to pay.
- The Statute of Limitations on the Obligation is Reset: Making a payment resets the statute of limitations on the debt. This provides the creditor additional time to file a lawsuit against you for losses.
It’s fine if you wish to pay off the debt or sign a payment plan, especially if it’s part of a larger debt management strategy. But first, acquire a written agreement.
Does debt go away after 7 years?
Even though loans remain on your credit report after seven years, having them removed can help your credit score. Only negative information on your credit record is removed after seven years. Positive accounts that have been open for a long time will remain on your credit record eternally.
What is the minimum amount that a collection agency will sue for?
A collection agency will normally sue you for a minimum of $1000. In many circumstances, it is significantly less. It will be determined by the amount you owe and if they have a written agreement with the original creditor to collect payments from you.
What happens when my debt is sold?
You will owe the purchaser money if your debt is sold to a debt purchaser, such as a debt collection agency, but you will not owe anything to the original lender. It’s also worth mentioning that while attempting to collect on an outstanding debt, the debt purchaser must follow the same rules and regulations as the original creditor. You have the same legal rights as everyone else. A debt collection agency, for example, cannot unilaterally raise the interest rate on an overdue loan or account.
When your original creditor decides to sell your debt to a third party, they should tell you. You’ll probably also get a letter from the debt buyer outlining who they are and why you need to pay them right away.
It is critical to be proactive and take the procedures necessary to safeguard your rights if you are receiving frequent phone calls and letters from a debt collection agency. This is why it’s a good idea to take advantage of the resources and information provided by SoloSuit.
How long can creditors pursue a debt?
A statute of limitations is a legislation that specifies the time period during which a creditor or collector may sue debtors to collect debts in each jurisdiction. They usually endure between four and six years after the last payment on the obligation was made in most jurisdictions. This means that if you’ve made a payment in the recent four to six years, you may be able to collect on a debt that’s older than that.
Once a debt has passed the statute of limitations in several areas, a collection agency is prohibited from attempting to collect at all. They can’t sue you in other states, but they can still try to collect the debt through phone calls and written demands.
Some debt buyers—companies that buy and try to collect extremely old debts—continue to pursue borrowers and may even go to court. They may have broken the Fair Debt Collection Practices Act if they do this knowing the debt is past the statute of limitations. They also know that most borrowers who are sued for previous debts will fail to appear in court, resulting in a default judgment from the judge.
How do you ask for goodwill deletion?
You’re asking a creditor or collection agency to erase a negative note from your credit reports when you submit a goodwill letter. What’s the point? Dings on your credit reports, such as a late payment or a collection account, remain on your reports for seven years and lower your credit ratings. This could make getting approved for future lines of credit or financial accounts more challenging.
If you made a mistake due to unforeseen circumstances, such as a personal emergency or a technical issue, write a goodwill letter to the creditor and urge them to consider removing it. The creditor or collection agency may request that the negative mark be removed from the credit bureaus. If the bureaus agree, you may be able to avoid years of credit problems.
Keep in mind that a goodwill letter is not the same as a disagreement. When you call the three major consumer credit bureaus to dispute something on your credit reports, you’re alleging that something on your reports is incorrect.
You’re not contacting the credit bureaus or disputing an error with a goodwill letter. You’re contacting the original creditor or collection agency directly to apologize for a blunder and asking that it make a “goodwill adjustment.” In other words, you’re requesting that the creditor disregard something unfavorable that is actually a genuine gesture of goodwill or understanding.
It’s important to remember that goodwill letters aren’t an official strategy. The credit bureaus, the Consumer Financial Protection Bureau, and the Federal Trade Commission do not publicly promote them as a realistic solution. In fact, the FTC claims that the only method to get rid of true negative evaluations is to wait. Goodwill letters have been reported to work in internet forums, however creditors aren’t compelled to evaluate or reply to your request because it isn’t an official or formal complaint process like a dispute.
“It never hurts to ask,” says Rod Griffin, head of consumer education and engagement at credit bureau Experian. “However, in most cases, a goodwill letter will not result in the removal of the bad information.” “Lenders are required by law and contract to accurately report the account’s history, including any late payments.”
As a result, some lenders may respond by stating that they are legally bound to preserve the negative record on your credit reports.
