Question: I have three debts totaling about $4500, all original debts are on my credit report, but nothing from the credit agencies; I’ve recently come into a few thousand dollars, not common for me, so I thought I’d take care of my debt. I figured I’d pay off the smallest in full and then do a down payment thing to reduce the amount owed on the rest and then get on a payment plan.
I received a letter in the mail that my largest debt was purchased by a collection agency and that I need to call them to pay or make arrangements, so I did, but now that I’ve done more research I feel that might have been a mistake.
I’ve read that I should have contacted the original creditors first, then if needed the collection agency and via writing first, not phone, offered a lump sum not get on a payment plan, asked them to validate the debt and some other stuff, mostly though that I should have gotten everything in writing.
It’s safe to say that I am worried and confused. Here is what I discussed and agreed to via phone with the agency … $400 down payment on the 24th of this month, then $100 every month after starting in March. They reduced the debt from $2800 to $2500 and there would be no interest if I made payments by checking account; didn’t give that information, instead of money orders.
I guess I’m wondering what I should do now, is it too late to ask that the debt be validated since I already acknowledged it when I called, or to ask for the terms we agreed to over the phone be sent to me in a written statement before I make my down payment.
Can I renegotiate all together to offer a lump sum and have the debt be considered paid in full? How do I know the agency will tell the original creditors that I paid the debt so that it gets fixed on my credit report? I’m a little lost and still have my other two debts to tackle, but I’d like to handle them with a little more knowledge to get the best result, so any information would be appreciated.
Answer: You have asked several questions and I will address what I believe may give you some insight as you choose what steps to take:
Debt Validation. You can request debt validation any time but there is no law requiring a debt collector to honor your validation request after the debt collector has sent you a debt validation notice within five (5) days of their first communication with you. If the first communication to you was a letter it may have included the debt validation notice. Read “What is Debt Validation” to get an idea of how the process works.
Agreement to Pay. I am not an attorney and I suggest you seek legal advice; however, I do not believe you have a binding agreement with the debt collector. By your own admission, you did not get anything in writing so you have nothing spelling out the terms or to force you to keep the agreement with them. If you decide not to honor the agreement, they do not have anything in writing to enforce the terms.
But keep in mind that if the debt is within the statute of limitations, they could file a debt collection lawsuit against you. Alternatively, if the statute of limitations has passed, you may have re-started it just by acknowledging you owe the debt.
Negotiate a Settlement. If you are sure you want to pay the debt collector you should negotiate a settlement. Debt collectors pay pennies on the dollar when they purchase a debt. There is no reason to pay the full amount. Read “How to Settle Debts with Collection Agencies.” This should give you some insight on where to start settlement negotiations.
Debt on your credit report. Paying a debt to a collection agency in no way affects the listing of the original creditor. If there is a charge-off from the original creditor, it can remain on your credit reports for up to 7.5 years even though they sold the account to a debt collector.
When you have a charged off debt: (1) The original creditor places a negative mark on your credit report; and (2) The debt may be sold or transferred to a debt collector and in turn, the debt collector places a negative mark on your credit report also.
Pay for Delete. Some collection agencies will delete the negative mark in exchange for payment. You will have to request a pay for delete and it must be done in writing. But a pay for delete does not remove the original creditor’s negative notation on your credit report, it only deletes the collection agency negative notation. Read more about pay for deletes regarding collection entries.
Deal with original creditor. The only way to have the original debt noted as “paid” is to deal directly with the original creditor. If you can get the original creditor to pull back the debt from the collection agency and pay them directly, the collection agency will no longer be in the picture. If you convince the original creditor to remove the charge-off from your credit report in exchange for payment, the collection agency would have no basis to report a negative mark on your credit reports.
You want to negotiate a pay for delete agreement as a deletion would be better for your credit score. If the original creditor does not agree to delete the negative listing request a less negative rating such as “account closed”, “account settled” or “paid” instead of the charge-off status.
Request to speak with someone, like a manager, who has the authority to remove the charge-off from your credit reports because speaking with just a representative answering the phone may not result in the desired results.
Whatever agreement you are able to negotiate, get everything in writing before you make any payments. Good luck to you.