Collection Agencies

Collection agencies can be ruthless in their methods of collection. Many individuals feel intimidated and fearful of collection agencies.

An agency is retained when the original creditor has given up on you. A collection agency may purchase the debt from the original creditor for a large discount, or it may take a percentage of what is collected and then pay the difference to the original creditor.

To avoid intimidation, know your legal rights concerning collection agencies. The 1977 Fair Debt Collection Practice Act protects consumers from unethical bill collectors. To receive a copy of this law, write to the Federal Trade Commission (which enforces the provisions of the act), Sixth and Pennsylvania Ave. NW , Washington , DC 20580 .

Whenever you deal with a collection agency, have a plan and don’t allow the agency to intimidate you into making payments you can’t afford.

It is not uncommon for a collection agency to continuously call you and send you letters demanding that you pay off the debt.

A collection agency knows if it can get you to respond within 60 days, the chances of collecting the amount due is the highest. The more time between the first contact and collecting the account, the less chance the collection agency has of collecting.

As the months go by, the calls and letters become fewer and fewer. The approach changes, too. The first three months the collection agency will come on strong and not be open to any negotiations or settlements. As time passes, the collection company will be offering you a substantial discount to settle the account, figuring that something is better than nothing.

SUSAN’S STORY

Susan was in a panic when she called our office. She was a single mother and had lost her job. It took Susan several months to find another job and she had to take a pay cut. Her bills had fallen behind and several accounts were turned over to a collection agency.

That morning a collection agency called Susan at work. The collector said that if she didn’t pay the bill within 24 hours by a cashiers’ check that the collection agency would turn her account over to its attorney, who would enforce the collection action. The collection agency could have her wages garnished and she could go to jail.

Susan didn’t have the money to pay the collection agency. She pleaded with them to work with her but the collection agency said she had to pay the bill in full

As I listened to Susan, I could feel her fears and anxiety It’s not the first time I had heard a horror story relating to collection agency tactics.

I told Susan, “Don’t let the collection agency intimidate you. If you don’t have the money, don’t pay it. Collection agencies are notorious for using fear tactics.” As I felt Susan’s tension lessen, I told her, “Collection agencies can’t garnish your wages unless there is a judgment against you. You would have to be served papers for a law suit. At that time you could try to settle the account. Most of the time a collection agency never sues; they only threaten. Tell the collection agency your employer doesn’t allow you to receive personal calls at your work. Once you have told the collection agency this, they can’t call you at your employment.”

As I spoke with Susan, she started to feel stronger in dealing with the collection agency. Knowledge empowers you to handle situations in unfamiliar territory.

Collection agencies have a way of playing mind games with people. During a weak moment when you let your guard down, panic will seize you.

Susan called me again the next morning, still a little uncertain of her position. She said, “Just tell me one thing. Can I go to jail?” I quickly said, “No, there is no debtors’ prison.” That was all she needed to hear, and we quickly hung up. The pressure was off her and her fears removed so she could handle her problems with her new knowledge.

THREATENING JUDGMENT

Q. Can a collection agency get a judgment against me?

A collection agency cannot represent or imply that the nonpayment of any debt will result in an arrest, garnishment, or attachment, providing the collection agency does not intend to take legal action. The threat to take any action that cannot legally be taken or that is not intended to be taken is a violation of the consumer’s rights.

If the collection agency has purchased the debt from the original creditor, it can enforce a lawsuit against you to collect the debt. If it does go to court and you lose the case, a judgment can be made against you and it can try to collect the debt. It must follow the court’s procedures when trying to collect.

If the collection agency has not purchased the debt from the original creditor and is only receiving a percentage of the amount collected, it must follow the instructions from the original creditor. The collection agency cannot sue you. Only the original creditor can initiate a lawsuit.

FINANCE CHARGES

Q. How much interest can a collection agency legally charge?

A collection agency cannot add on any finance charge or service fee in collecting a debt unless the extra charge is authorized in the agreement creating the debt, which the consumer signed.

When you complete a credit application, or information sheet for a doctor, dentist, hospital, or any type of credit, there is a disclaimer usually at the bottom of the information sheet. It is usually in small print and will have a statement that by signing the contract or application, you are agreeing to pay what is owed, or you will pay for services rendered. If you do not pay what is owed, the credit grantor has a right to add a finance charge (the percentage or amount must be stated) to the outstanding bill. By signing this, you are agreeing to pay the finance charge. If the account is turned over to a collection agency, you already have agreed to pay the finance charge.

If you never signed an agreement indicating you would pay a finance charge, you do not have to pay one.

Always keep copies of what you sign. Without your copies to refer back to you would never know if the company was adding on charges that you are not obligated to pay.

If a collection agency states that you owe a finance charge or interest on a debt, tell it to send you the original document you signed.

CALLS AT WORK

Q. The collection agency keeps calling me at work. They even told my employer that I owe them money. My employer is upset about these calls. How can I stop the collection agency from calling me at work?

A collection agency is not allowed to discuss with anyone other than you the purpose for their call. If they do it is a violation of the Fair Collection Practice Act.

A collection agency will try to call you at work. The collection agency has gotten your work telephone number from your original application.

The Fair Debt Collection Practice Act gives you the right to tell the collection agency to stop all telephone calls to your work. You must tell the collection agency that your employer does not permit personal calls. Once you have told them this, the collection agency may not contact you at your place of business. If the collection agency continues to call you at work and discusses your situation with anyone other than yourself you should file a complaint with the Federal Trade Commission.

DAUGHTER IS A MINOR

Q. We are trying to refinance our home. A collection account appeared on my credit report for my daughter. It was a medical bill. My daughter is a minor.

The reason your daughter’s account appeared on your credit report is because she is a minor and you evidently signed a form at the doctor’s office that you are the one responsible for paying her medical bill.

A child under the age of 18 years is considered a minor. A doctor will require a parent or guardian’s signature for the one responsible for the. payment of services rendered.

If the doctor’s bill is not paid and the doctor turns the account over to an outside collection agency, the parent or legal guardian who signed the form authorizing the services will be the one who is reported on the credit report by the collection agency.

DISPUTED ACCOUNT

Q. I received a letter from a collection agency indicating I owe money on an old account. I do not believe I owe this. What can I do?

Federal law gives you the right to verify any debt you feel is not valid. Whenever a collection agency sends you a statement that you owe money, the statement must provide “the amount of the debt, the name of the creditor to whom the bill is owed, and a statement showing that unless the consumer within 30 days after receipt of the notice, disputes the validity of the debt, or any portion of the debt, it will be assumed to be valid by the debt collector.”

If you do not write a letter disputing the debt the collection agency will continue to pursue collection. Write your letter disputing this debt within the 30 days that you received it. Send it certified mail with a return receipt requested.

The collection agency must send you verification of the debt, and any documentation related to the debt. It is not allowed to communicate with you prior to verification of the debt that you are disputing.

ONE ACCOUNT, SEVERAL COLLECTION AGENCIES

Q. I had an account that was charged off. The original creditor turned the account over to a collection agency. I never paid the collection agency and now there is a new collection agency involved. What is going on?

Many times after an original creditor has charged off an account, it will turn the account over to an outside collection agency. The agreement may specify the length of time the collection agency has to collect the debt. If the agency doesn’t collect, the creditor may replace one agency with another.

Usually when a new collection agency is noted in the credit report, the old collection agency is deleted.

If you wish to settle the account, you must contact the new collection agency.

THE DEBT WAS SOLD

Q. Several years ago I had two accounts that were charged off They both were turned over to a collection agency. I never paid the collection agency and was just notified from a third company that it bought the debt and would work with me to help me reestablish my credit. Who are these people?

There are several companies purchasing debts from the original creditors for pennies on the dollar. Usually these accounts are several years old and the original creditor will take what it can get and sell the debt at a discount. The original creditor will notate a zero balance on your credit re port and that the debt was sold. The entry is still noted as negative.

The new company that purchased the debt will put a negative entry on your credit report. On the credit report the entry will also list the original creditor and the date of the last activity on the account.

When the new company makes initial contact with you regarding the debt, the conversation will go something like this, “Hello, I am Mr. B from XYZ Company. We have recently purchased your debt from ABC Company and want to help you reestablish your credit. We are willing to give you new credit if you pay 50 percent of the debt now and start making regular payments. By doing this you will get rid of the negative entry and be able to start rebuilding your credit. How does that sound? When can we expect your payment?” Every company has its own approach to trying to collect; however, the damage is already done on your credit report from the original creditor. The new company can discount as much as it wants because it paid such a small amount for the debt. You would have to determine by reviewing your financial situation if you could begin making payments to this new company. The new company could have the original creditor delete the negative entry on your credit report.

MEDICAL BILLS MY INSURANCE COMPANY SHOULD PAY

Q. I was applying for a credit card and was denied the credit. When I received a copy of my credit report I discovered two collection accounts on my credit report for medical bills that my insurance company was supposed to pay. What can I do? The collection agency only wants its money and won’t cooperate.

This seems to be a common problem. Some hospitals and doctors’ offices will charge off an account if it has not been paid within a certain time. This is even if a payment from the insurance company is pending.

Most of the time the accounts are sent to an outside collection agency that reports the account on your credit report.

Contact the doctor or hospital before contacting the collection agency to try and settle the account. You might even try sending a check to see if it is cashed. If the check clears, contact the collection agency and let it know the account has been paid.

If the doctor or hospital agrees to accept payment directly from you rather than the collection agency, it should contact the collection agency once they receive the payment to remove the account from your credit report.

If the doctor or hospital do not cooperate with you, try to get the insurance company involved to back up your explanation.

The collection agency will only take instructions from the original creditor who is the doctor or hospital. If the collection agency gives you a hard time and begins harassing you, file a complaint with the Federal Trade Commission. Send a copy of the letter to the collection agency to let them know you mean business.

STOP HARRASSMENT

Q. I have been getting telephone calls from a collection agency early mornings and late at night. When they call, I feel like they are harassing me. They have even threatened me with being arrested. What can I do? Can they do this?

No! A collection agency is regulated by the Fair Debt Collection Practice Act. This law was designed to protect you from unfair practices by collection agencies. You can request a copy of this law from the Federal Trade Commission.

A collection agency cannot call you before 8:00 AM or after 9:00 PM . If they do they are breaking the law. A collection agency is not allowed to threaten you. You can’t be arrested for not paying a bill.

Write a letter to the collection agency telling them that you do not want any further contact. Mail it certified mail with a return receipt. The collection agency is allowed to make one more attempt to collect the bill after receipt of your letter; however, they must notify you of what their intent is to try and collect. From that point on, the collection agency is not al lowed to contact you. If they do, make sure you get the name and telephone number of the individual you talk to. File a complaint with the owner of the company, the original creditor, and the Federal Trade Commission.

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