Having just one collections account on your credit can tank your credit score and keep you from getting a loan. If you have several, you’ll probably need to take care of them before the 7 year reporting statute of limitations causes them to fall off.
You can try paying a credit repair company to do it for you, but they don’t have good track records to begin with, and you’ll be paying at least $80/month regardless if they do anything for you or not.
Everything listed here can be done yourself for far less than you’d ever pay a third party.
One important thing to mention is that it helps to have the money to pay the entire balance. These methods won’t really do a lot for you if you cannot pay what you owe (for the most part). There is a big difference between getting an unpaid collection off of your account and getting a paid collection removed. It’s very difficult to get non-medical unpaid collections taken off of your credit since it removes the incentive for you to pay it. This would help someone looking to get a car or home loan in the very near future, but who has bad credit because of a collection account that won’t fall off for several years.
The other important thing to note is that debt collection agencies have to follow about 30 different rules under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. Messing up one time, even if you owe them more than the penalty, can make it far easier to get an account removed.
FIRST STEP: Always send a debt validation letter
This is the act of sending a short letter to the collection agency requesting validation of the debt. In it, you’ll just mention that you request validation and that you dispute it. Also, if there is any sort of arbitration clause in the contract (loan document, credit card user agreement, etc.) that you wish an arbitrator to decide your grievances.
Once they receive the letter (send it certified mail), they must stop trying to collect the debt until they validate it. That means no phone calls, letters, etc. After a month, if they still haven’t validated it, you may want to skip down to the “file a dispute” section.
Offer to pay the original creditor (OC)
Many creditors don’t actually sell their debt, they assign it to a collection agency. If you can, try making a payment through the original creditor’s (not the collection agency’s) online interface. There is a good chance it won’t work, but if it does, they cannot take your payment and assign it to their collection agency. If they do, it’s a simple dispute with the credit agencies showing the payment you made directly to the original creditor, requiring the removal of the collection account.
Get an agreement in writing from the collection agency for a removal of the account in exchange for payment
Companies that do sell their debt will generally be done dealing with you, which might require you to deal with the collection agency. Though they may not do it often, try to an agreement in writing (an email will work) saying they will delete the account from your credit report in exchange for full payment. There isn’t much more to this other than telling them something like “I dispute the validity of the debt but I just want to put this all behind me.”
File a dispute with the credit reporting agencies after paying off the account
If you hear nothing from the original creditor or if the collection agency won’t entertain your offer for payment in exchange for removal, you can try filing a dispute on your credit reports (from Experian, Transunion, or Equifax). If a month has passed and they still haven’t validated the debt to you in writing, updating their account on your credit report could be seen as collection activity, since it can prevent you from getting a loan.
Even if they have validated it, there is a chance that they won’t respond to the credit bureau’s request, which is the best case scenario. You can request an investigation into the details of the debt, the balance, monthly payment history, several different things. While you don’t need to provide documentation supporting your case, you can if you wish. The collection agency will have 30-45 days to verify everything with the credit bureaus.
Begin arbitration proceedings
Collection agencies are in the business of making money, which will probably result in most of you getting to this step. You might think that they’d happily take a paid in full offer to take the account down, but the credit reporting agencies may take away their reporting abilities if they remove too many accounts. To them, it’s worth it to be able to screw up people’s financial lives in order to get them to pay rather than go for a quick payout.
The majority of collection accounts go back to either medical debt or credit card debt. Medical debt collectors often (but certainly not always) remove their accounts due to HIPAA concerns once they have been paid. Or, you can usually get them off of your credit by calling or writing them a letter (always send letters Certified Mail, it makes you look serious).
Credit card companies usually have an arbitration clause in the cardmember agreement. At most, it costs you $250 to get it started and it can cost the credit card company well into the five figures before it’s all said and done. To credit card companies, it’s nothing to drop $30k in legal fees defending a $1000 debt in arbitration, just so that anyone with significant credit card debt doesn’t just do the same thing, knowing that they’ll get the credit card company to drop the case.
Collection agencies are much more hesitant when it comes to arbitration. Some will immediately transfer the debt back to the original creditor if you want to arbitrate, others will ignore you if you want to file, while leave the account on your credit. Even if the arbitrator starts sending them letters, they’ll ignore you until the last second before the arbitrator drops it for non-payment of the collection company’s fees.
It’s usually at this point that you can work out a deal with the collection agency, while requiring them to remove the account from your credit reports in exchange for not going forward with the arbitration process. Let them know early on, usually by CC’ing emails to the counsel that emailed you as well as the general counsel of the collection agency and their customer service email, that you are going to draw it out as long as possible, you’ll ask for in-person hearings, appeals, discovery hearings, etc. At the same time, let them know that you’ll drop it all and not say a word about it to anybody if you work out a deal immediately. Many times, that will get them to play ball.
Get an attorney involved
If you do find that a collection agency has stumbled its way into breaking a rule set forth in the FCRA or FDCPA, start calling debt collection attornies. Some may not be willing to work for you if your case is pretty small while others will gladly work for you since they get paid an hourly fee from the collection agency no matter how much they win for you.
Sue in Federal court
In cases where there is an arbitration clause and the collection agency (or other creditor) doesn’t respond to your request for arbitration after you’ve paid your filing fee, you’ll need to sue them in Federal court. This is going to run you $400 but you will almost always get that awarded, plus your original arbitration filing fee, back to you after arbitration is done.
You’ll rarely have to do this since collection agencies know that you kind of have them by the walnuts if you file a motion to compel arbitration in Federal court, especially after they ignored your request in the past. When it gets to this point, you can often tell them you’ll drop the request if they agree to forgive all the debt and remove the accounts from your credit report.
You might wonder why you don’t just do this first if it results in the best outcome and you’d probably find out that most companies will play by the rules. If you go straight to Federal court, they’ll go right into arbitration with you and there is a good chance you won’t be awarded any of your arbitration fees. It’s more for use against a shady collection agency that just 100% doesn’t seem interested in talking with you, or if they haven’t responded to any communication at all.
Submitted March 05, 2017 at 05:56PM by amyhine http://ift.tt/2mc8MNF
