Collection Agencies and Your Debts

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People who do not pay off their debts risk to become clients of a collection agency. But sometimes such an agency calls you up and asks for repayment of debts that you do not even have. What can you do in this situation?

Debt is always an unpleasant thing. We are always concerned about them and try to pay them off on time; otherwise a bank may refer to a collection agency that will force you to pay your debts. Unfortunately there are cases when collection agencies ask people to pay debts that do not belong to them. The reason might be a mistake of a bank or a collection agency itself. Anyway you have to know how to deal with collection agencies.


How does a collection agency work?

If you do not pay your bank debt during one hundred and eighty days from the moment of its receipt, the bank will hire a collective organization that has to collect your debt. And usually after some more months the bank sells your debt to a collection agency. In this case, when the bank has sold your debt, it does not have any relations to your debt anymore. And because of that a collection organization might take from you more money than you should have paid to the bank to make a profit from buying this debt.

It should be mentioned that not only bank debts can be transferred to a collection agency. Any debts you have including medical loans and utility debts can end up in such an agency.

After the information about your debt comes to a collection agency, a notification about it will appear in your bureau. This notification can significantly influence your score.


How can activity of a collective agency influence your score?

As it has been mentioned, once a collective agency receives your debt data, your bureau acquires a status of a “collection account”. These harmless at first sight words can greatly affect your score, and the degree of this influence depends on the size of your score. The higher your score is, the more points it can lose.

This information about the status of your account remains in your bureau for seven years. It should be mentioned that those seven years start only after one hundred and eighty days of non-payment, or after a collection agency receives the information about your debt.

The only way to get rid of this status is to make a collection agency remove your debt after paying it. You may ask this organization to have a “pay for delete” deal. It means that you agree to pay the sum that a collection organization wants you to pay, and after the repayment is done they remove a notification “collection account” from your bureau.


What can you do to change the situation?

If you are sure that the debt a collection organization wants you to pay is not yours, you can write a letter to it within thirty days from the first collection activity confirming that you do not have any debts. If the organization does not provide any proof that you owe the debt, the information in your bureau will be renewed and all the collection activities will be stopped.

In the situation when the agency provides proof that you actually have the debt, but you do not agree with it, you can search for help in CFPB. Consumer Financial Protection Bureau is an organization that helps people in the situation when their financial rights are violated. This organization controls the work of banks, credit unions and other financial companies and ensures compliance with financial laws that protect you from fraud and abuse.

So, you have to remember that if you have any debts you have to pay them on time unless your debts may be bought by a collection agency. And this purchase can bring you a lot of troubles. You will receive unpleasant calls from the agency workers asking you to pay your debts off, and in addition you will acquire the reputation of a “bad borrower” and that can cause problems with your future loans.