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When We Received a Collections Letter

Last week, I was flipping through our mail when I noticed an envelope stamped with “REMITTANCE” (or REMITTAL, I don’t have the envelope anymore). Capital letters intimidate me, so I opened it right away. It turned out to be from a collections agency.

Lesson #1: Open all mail that isn’t clearly spam.

My first thought was “WHA?” because clearly we’d paid all our bills. I saw it was from Micah’s school, so I gave it to him and asked for an explanation.

Fortunately, he knew exactly what it was. This year, there’d been an issue with applying his scholarship (oh financial aid departments!) and the school had gotten it late. I then remembered the initial warning letter from the school himself which had led him to straight it out. This letter identified itself as a “friendly reminder from X collections agency.”

So the first thing he did was check the account. He logged in and saw that the scholarship had been applied on the same day the collections letter had been sent. Smart boy.

Next, he directly called the lady he’d been working with. She knew the account best and was able to confirm that everything had been processed. She explained that the collections agency must not have been informed until after the letter was sent.

To be safe he called the number listed on the letter, which was just for another department of his school (since it was a “friendly” letter, he didn’t have to work with the agency itself). He told them about the letter, his student ID#, and the story of his account. They confirmed that no further action was going to be taken by collections and that the request had been cancelled.

We kept the letter just to be safe.

We were fortunate not to actually owe them money. And fortunate in being able to work it out with the college itself. It’s surprising how many collections letters are sent out by mistake (at least, the bill hasn’t been received…or it hasn’t been received (again)…or it’s already been paid). Normally there was a bill to begin with.

Some things to do if you get contacted by a collections agency:

1. Call the company who originally issued the bill. Try to work it out with them. If possible, offer to pay the bill immediately. Or ask to get some kind of installment plan worked out. This will be the best for them, since collections will take part of the money they get.

2. Don’t ignore the letters. The debt won’t go away.

3. Read up on your rights under the rules for Fair Debt Collection. Learn how to stop them from contacting you, whether or not you owe the money (though that won’t make the debt go away). You can ask them to contact you only in writing so you won’t get harassing phone calls. That way you can work up the energy to deal with them.

4. Don’t acknowledge debt you’re not sure of. Including really old debts. “A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.”

They have the burden of proof. If they sent you the bill and you don’t think you paid it, check rules on debt expiration…then decide what you’re going to do about it.

5. If at all possible, resolve the issue. You don’t want this looming over your head. If you have an emergency fund, this is the time to dip into it. If not, try to work something out with the original company. If that fails, talk to the collections people about working somthing out.

Don’t give them post-dated checks, however. Because while it’s illegal for them to cash those, some will do it.

6. Coming from that—only pay with money you have. As a general rule, getting a loan to pay off other debts or using post-dated checks is a dangerous and destructive practice. If you’ve got bills piling up, collections agencies hounding you, etc, you probably aren’t good for the loan either. It’ll be one more headache.

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Amy May 13, 2008 at 11:32 am

Great post! Two points to include – never give the collections agency electronic access to your checking account or they may “accidentally” take more than agreed (a money order is best) and if you negotiate down the debt, always get it in writing before giving them money!

Aryn May 13, 2008 at 1:13 pm

This happened to us, too. A lab my doctor used sent the bill to the wrong address for a year and a half, then put it into collections. Apparently they people who lived at the address where it was sent never bothered to return it as “not at this address” during that time. Finally they sent it back to the collection agency, who used my credit report to find me.

Not only was it not my current address, it was not an address where I had ever lived. Yet the collections agent still wanted me to pay him interest and fees because “he’d had to find me and he deserved to make a profit.”

I should have thought to call the lab, but all I got was the letter from the collection agency and had no idea who the lab was. I did find a statement from my insurer indicating that I did owe the lab fees.

I finally managed to convince the agent that I would pay the full amount of the lab bill, but I would not pay any interest or fees because I didn’t do anything wrong. I couldn’t very well pay a bill I never received.

We also agreed that the collection would not appear on my credit report.

The whole thing made me mad, though. They screwed up, not me, and I got hassled over it.

Dad May 13, 2008 at 11:11 pm

Good advice. It is good to know the procedures that must be followed. Some people who make collection calls will skirt the very edge of the law or even violate it. They want to scare you into paying so that their collection rate goes up. They may get incentive pay for their success.

I had a problem once because the health insurance company failed to pay. I went round and round and ended up paying the debt because I was responsible. It was partially fixed later when my insurance company discovered the error in an audit and sent me the payment. By that time I worked for a different company and had a different insurer.

I’ve also had a number of cases where the payment crossed the collection letter. This is especially been true with insurance payments as some insurers put off the payment as long as they can ‘get away with it.’

Ron@TheWisdomJournal May 14, 2008 at 8:37 am

What chaps my hide is that they never take just a few minutes to make a simple phone call. They can call you trying to sell some gizmo, gadget, or unneeded service, but they can’t call and say, “Have you had a chance to get that check in the mail to us yet?”

David September 2, 2008 at 11:31 am

So glad it turned out to be nothing major, but just as a precaution you may want to call the agency directly and let them know – there isn’t the greatest of communication going on between these type of parties!

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