Fair Debt Collection
Have you paid or otherwise satisfied a debt “in full,” or so you thought, only to be told you owe more? Before you consider paying the debt collector the difference you should ask an attorney whether the request for more money (or in some cases, failing to tell you that you might owe more due to “accruing interest and other charges”) violates your FDCPA or other consumer rights. Specifically, third party debt collectors are only allowed to add collection fees allowed by the original credit contract, state law, or in some cases federal law, and any attempt to collect a fee not otherwise allowed, and even failing to disclose a fee that is allowed, may turn the tables on the collector and make them answer to you. For more on this see collection fees and interest on debt.
Paid Creditor or Collector in Full:
Here are a few situations that might occur:
1. The debt was not delinquent and you paid the debt off but the creditor mistakenly sent it to collections.
ANSWER: Call your creditor immediately and ask for a manager, then explain that you paid this debt in full and can prove it. Insist that the creditor send a “paid in full” statement to you right away. Then demand the account be pulled back from collections and your name removed from any black list. Next, ask if it’s been reported to any credit bureau and if so, insist any negative information be removed and the account reported accurately (paid in full – not delinquent)
Finally, send a follow up payment agreement letter to the creditor outlining what happened, what they agreed to do about it, who you spoke with and the time and date. Follow our mailing instructions and send this letter return receipt requested. DO NOT forget this part. Having agreements in writing is your only protection.
2. You paid the debt in full to the creditor between the time the creditor sent the account to a 3rd party collector and the collector called you.
ANSWER: Assuming the debt was delinquent. (If not, see number one above). You could still be liable for reasonable collection fees. Call your creditor immediately and ask for the exact date the account was sent to collections. Then, using that date, make sure they did not violate any rules outlined in the credit disclosure statement such as notifying you before going to collections, grace periods and anything else that might have prevented the account from going to collections. If they did violate one or more rules, use it as leverage to have the fees removed.
If they did not violate any rules and the account was delinquent, then they are within their rights to send the account to collections and you may have no choice but to pay the fees. Be sure the fees are legal. Try to negotiate out of paying the collection fees by reminding your creditor of your good payment record, number of years as a customer, and so forth. If they refuse, try to negotiate the amount of the fees. If they agree, send a follow up letter to the creditor outlining what they agreed to, who you spoke with and the time and date. Send this letter return receipt requested.
3. You paid the debt in full to the creditor after a 3rd party debt collector called you.
ANSWER: If the debt was NOT sold, see my answer to number 2 above because most of that still applies. However, if the debt was sold and the creditor accepted your payment in full, there is a deeper legal issue here because the creditor no longer owned the rights to the account and should not have accepted your payment. Immediately dispute the debt with the collector using this paid-in-full sample letter. The issue is should be between the collector and the creditor because the creditor was already paid for the account and now they accepted your payment as well. It should be up to the creditor to settle with the collector. Do everything in writing and keep accurate records. Keep in mind that the collector legally purchased the debt and the rights to collect it so you could end up paying the debt twice and then suing the creditor to get your money back.
4. You paid the debt in full to the collector.
ANSWER: When collectors say you still owe them money after you’ve paid them in full, it’s almost always because the agreement was not in writing. A typical scenario is you offer over the phone to pay a certain amount but only if the collector will accept it as payment in full. The collector readily agrees and you send the payment right out. A few days later the collector calls back and says you still owe the rest of the account. They use a myriad of excuses why the account is not paid, but the real deal is they believe that because you paid the first amount, you can afford to pay more. Without the agreement in writing BEFORE paying the debt, you have no real proof of the agreement and the collector knows that.
You have two choices; pay the additional amount or refuse to pay it. If you choose to pay make sure that you are only paying the amount that collectors can legally charge.
If you choose not to pay, send a letter that clearly states the verbal agreement details, especially the time, date and amount of payments. In the letter state that you consider the account as paid in full. The collector could still try taking you to court, and depending on the amount of the debt, might just do that. Don’t panic! Go to court prepared with all of your documentation. Check your state laws to see what they say about verbal agreements as well. Some states accept verbal agreements the same as a written contract. The key is to show your good faith in resolving the issue especially with a record of payments.
Whichever choice you make….do it in writing!
* The answers on this page assume the collector is a 3rd party collector and not an internal employee of the creditor collecting the debt.