How Do I Pay Off Collections On My Credit Report – Home » Credit Card Debt Relief » Credit Counseling » Bad Credit » How to Dispute Charges and Debt Collectors
Anyone looking to contest a debt that has been collected – even someone with as solid a case as Gibraltar – needs to know what they’re up against.
How Do I Pay Off Collections On My Credit Report
Debt collection in the United States is so great that only a ludicrous description can do it justice. Simply put, it’s huge: 7,000 collection agencies, with a market cap of $18.8 billion, collect about $13.4 billion annually.
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The collection sea is foaming: The Consumer Financial Protection Bureau (CFPB) received 70,348 complaints about debt collectors in 2021. The number has steadily increased each year for the past decade, and is by far the industry’s top number of complaints received by the department. bill collection.
Those numbers won’t shock anyone who is way behind on their bills. Knowing that debt collectors can be ever-present and relentless, they might be tempted to ask, what else is new?
A recent rule change adopted by the CFPB provides guidelines for debt collectors trying to contact you via email, text, and — presto? – social media. Yes, that connection request on Facebook, Twitter or Instagram could be from someone looking to collect a debt.
What to do in the face of all this pressure? First, don’t hide, especially if you have legit meat. Credit screening agencies are far from perfect. More than half of the complaints filed with the CFPB in 2021 and 2020 came from consumers who claimed to have been contacted about debt they did not owe — a 25% increase over the previous two years.
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To stop the collection calls, pick up the phone and follow the steps outlined by Washington attorney Ira Rheingold, a more than 20-year veteran of the debt collection war as executive director of the National Association of Consumer Advocates (NACA).
“Take it and tell the person on the other end of the line: stop calling me!” says Rheingold. “But before you hang up, get their name and address, then sit down and write a letter telling them not to call you. Send it by certified mail, return receipt requested, so that you have a record of it if you continue.
It’s duck-in-a-row time: “Most … complaints are about consumers being harassed for debt they don’t owe,” said Rheingold, who appeared on CSPAN for an hour to discuss problems with debt collectors. “In many cases the wrong person is being harassed or even sued for the wrong amount of debt and collection agencies are using very limited information to open these cases.”
Debt collectors rely on a variety of sources of information in their collection efforts. To successfully dispute your claim(s), the consumer must be methodical and thorough.
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“The first step,” says Michael Cummins, chief financial officer at InsuranceGeek, “is to gather all of your debt-related information and evidence. This includes any letters or documentation you’ve received from the creditor, as well as proof that the debt is not yours. If you have witnesses who can attest to the fact that you don’t owe the debt, you should also collect their depositions.”
Performing these steps will begin the process of eliminating the erroneous claim against you. But there is more to do.
If you doubt that you owe a debt or that the amount owed is inaccurate, the best course of action is to send a debt dispute letter to the collection agency requesting validation of the debt.
“An effective debt dispute letter needs to be clear and concise,” says Daniel Chan, chief technology officer at Marketplace Fairness. “It must include all relevant information about the debt.”
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A debt dispute letter requires the collection agency to demonstrate that you owe the debt and can provide detailed information and documents to prove the amount owed.
Federal law states that after receiving written notice of a debt, consumers have a 30-day window to respond with a debt dispute letter. The Bureau of Consumer Financial Protection Debt Collection Rule of 2021 made it easy on you by requiring all debt collectors to provide a tear-off form that you can use to dispute the debt, rather than writing a letter.
This form will form part of a validation notice that debt collectors must send to you, which also includes:
If you do not dispute the debt within 30 days, the debt collector considers the debt valid. If you dispute, the collector should stop contacting you until you provide verification of the debt.
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If you are writing a letter, rather than using the tear-off form, the debt dispute letter must include your personally identifying information; verification of the debt amount; the name of the debtor; and a request that the debt not be reported to the credit reporting agencies until the matter is resolved or removed from the report if it has already been reported.
A second dispute letter should be sent to the credit reporting agencies with the same information so that they are also aware that the debt is in dispute.
Often, however, the matter is not resolved until the information has already appeared on your credit report and therefore becomes a negative factor in your credit score. If it appears on your credit report, another form of dispute letter must be sent to the credit reporting agency, disputing the accuracy of the information and requesting that it be removed or corrected. All three credit reporting agencies have online dispute mechanisms available when you obtain copies of your credit report.
If the debt is legally yours, knowing who to pay can be confusing. Debt collection agency? Original creditor? Bad debt often changes hands, sometimes more than once.
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There are essentially three scenarios for paying charges and the consumer can be confused as to who is being negotiated and who is being paid.
A creditor may have an in-house collections department. In this case, you are still indebted to the original creditor and they are the ones who receive payment.
Sometimes the creditor will hire a collection agency to chase the money for them. Ask the debt collector if he owns the debt. Otherwise, you can still negotiate with the original creditor.
Often, the last straw, the original creditor may sell the debt to a collection agency. In this case, the debt collector owns the debt, so any payments are made to the collection agency. (This amount can also be negotiable.)
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Problems between consumers and debt collection agencies have been around for some time. In 1977, Congress passed the FDCPA in an effort to protect consumers from abusive debt collection practices.
“Credit bureaus are required by the [FDCPA] to restore or delete any information that cannot be verified, is incorrect or incomplete within 30 days,” said Edward Mellett, founder of WikiJob in London. “Otherwise they have broken the law and you have the right to process and file a complaint with the Consumer Financial Protection Department.
“Be sure to build such a compelling case that the creditor will either have to agree with you or provide actual evidence to the contrary.”
Even with all these restrictions and protections, the CFPB and state attorneys general receive thousands of consumer complaints monthly about debt collection practices. Be aware that consumer complaints often arise because collection agencies do not accurately track the details of the original contract from start to finish.
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Debt collectors often target seniors, so many of these regulations are aimed at protecting seniors. Learn more about debt collection laws for seniors.
Sometimes it’s important to repeat the obvious: Job no. 1 is to check if the debt exists. In addition to the validating notice that debt collectors must submit, there is a statute of limitations for most debts. The statute of limitations varies from state to state, from just three years to up to 15 years. Most states fall into the 4 to 6 year range.
If the statute of limitations on your debt has passed, it means that the collection agency cannot obtain a court judgment against you. That doesn’t mean they can’t try to charge you, but if you refuse to pay, they have no legal recourse. However, unpaid debt remains on your credit report for seven years from the last time you made a payment.
Many of the problems start with the fact that debt collection agencies often buy debt from multiple sources and collect the money or sell the debt a second, third, maybe even fourth time. Along the way, the original contract is lost, and with it details of how much was originally borrowed, at what interest rate, what late payment penalties are involved, and how much is still owed.
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The consumer must keep accurate records of all transactions involving his debt, especially the original contract, the record of payments and any receipts. This information is used when submitting a dispute letter to the collection agency.
It’s still unclear if the validation process is working, so there could still be issues with the information on your credit reports. Every time your fault
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