How to Make a Payment to a Debt Collection Agency

How to Make a Payment to a Debt Collection Agency

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Working with debt collection agencies can be overwhelming, confusing and stressful. If you have a debt in collections, you probably need to know how to pay a debt collector. It’s not always straightforward. You have to confirm the debt belongs to you, learn about your legal rights and decide how you want to make payments.

Also, there are options when it comes to payment. Some may choose to pay their debts in full. Others may arrange a payment plan with the lender. Negotiating to settle the debt for less can also be done. Whatever path of paying debt collectors you choose, it’s best to know your options. Keep reading to learn how to pay off a debt in collections.

What is a debt collection agency?

When you owe money and do not pay it, eventually the person or company you are indebted to will work to collect that payment. They may work with a debt collector or sell off the debt to another entity. Let’s dig into what that means.

A debt collector is usually a person or company that collects debts owed to others. Often, debt collectors consist of collection agencies or lawyers who collect debts. There are also some companies that opt to purchase past-due debts. Those companies purchase the debt from creditors or businesses and then try to collect the debts themselves. You may hear debt collectors referred to as debt collection agencies, debt buyers or debt collection companies.

How does your debt end up with a debt collection agency?

A debt collection agency will contact you if it thinks you owe a debt. They generally do so via phone calls, texts, mail or email. There are rules regarding how and when collectors can contact you, outlined in the Fair Debt Collection Practices Act. They can’t contact you at times or places that are inconvenient. They may not contact you before 8 a.m. or after 9 p.m., unless you give consent to do so. Most importantly, if you tell them you can’t receive calls at work, they cannot call you at your place of employment.

You should inform yourself of your rights about the debt collection process early on. Once your debt is passed from the original creditor to a debt collection agency, the Fair Debt Collection Practices Act protects you against misconduct by collectors.

What if it’s not your debt?

If you receive a notice of debt in collections but do not believe the debt belongs to you, it is imperative that you take swift action. Within 30 days of your first notice from a collection agency, you should write a letter that is certified, copied and has proof of delivery to the collection agency. In that letter, inform the agency that the debt does not belong to you and that they must stop their collection activity. The agency must pause their collection activities until they are able to provide concrete proof of the debt to you.

How to make a payment to a debt collection agency

When it comes time to make your first payment to a debt collection agency, these are the steps to follow.

  1. Confirm your debt. You shouldn’t pay a debt collector until you’ve confirmed a debt actually belongs to you. Even if you aren’t responsible for paying the debt, if you make one payment, it’s possible you might assume responsibility for the debt. Double check the debt by reviewing your credit report. You can also contact the original lender to check. If you don’t agree with the amount the collection agency is requesting, you can dispute it under the FDCPA, and an investigation will be conducted into whether or not the debt belongs to you. You should also confirm the collection agency is not collecting on a cleared debt or on unpaid balances you’ve already made agreements to pay.
  2. Set up a payment plan. If you choose not to negotiate a settlement and instead take on a payment plan, you will agree on an incremental amount to pay towards the debt until you have paid it off. Before you make any sort of payment, your payment plan agreement should be received in writing.
  3. Make a payment. If you’re paying collection agencies, there are a few rules of thumb to follow when making debt collection payments. First, don’t allow debt collection agencies to make automatic withdrawals from your bank account. Any form of electronic payment may give a collector access to your bank account. The collector may ask you to pay electronically or via automatic deposits, but you can decline. Once they have access to your account, they could potentially take more money than authorized. Instead, make payments with certified funds. When you pay this way, your funds are guaranteed. This means there won’t be any risk of declined payments or bounced checks. You and the bank will have a record of the certified check, meaning that if your payment is ever questioned, you’ll have proof of payment.
  4. Keep records. Once you’ve made a payment, and throughout the entire collections process, you should keep records of any payments or communications. If an agreement, or changes to an agreement, is made over the phone, you should request a written copy of the details.

What happens if you don't pay off your debt in collections?

If you ignore debt collection payments, your credit score may be negatively affected. Having debt in collection can remain on your credit report for up to seven years from the date that your debt first became delinquent. After seven years, the mention of debt collection may be taken off your credit report. This can happen even if a collection agency has taken on your debt because you didn’t pay off your debt in collections.

Another consequence of not paying off your debt in collections is that you may be contacted by debt collectors until you pay off your debt, but you can request that they no longer contact you. It’s recommended to make that request in writing.

How to get your debt out of collections

You’re likely curious about how to get debt out of collections. There are multiple options for doing so, but the main three are:

  1. Pay debt in full.
  2. Negotiate a payment plan.
  3. Settle the debt for less.

Another option is to declare bankruptcy, but this is generally a last resort. Bankruptcy shows that you would struggle significantly to pay your debt. Filing bankruptcy can prove that it isn’t possible for you to repay your debt while maintaining a basic standard of living. It is worth noting that bankruptcy can negatively affect your financial life for years and is not a desired outcome.

Jacqueline DeMarco is a writer and editor based in Southern California. She has written on everything from finance to travel for publications including The Everygirl, Apartment Therapy, and LearnVest, among others. She shares all of her work on her personal website

The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.