7 Smart Ways to Ensure You Are Paying the Right Creditor

  

              

Many consumers do not know that once a delinquent account is reported to a collection agency a consumer has a short amount of time to pay the bill.  This is because collection accounts are put on a nationwide registry and each collection agency in the country gets notified of a collection account.  However, only one collection agency has a legal right to collect money on a delinquent account.

It can be very difficult trying to make payments on a collection account because a collection agency holds a collection account for a few months, it they are unsuccessful in collecting on the debt owed the account is forwarded to another collection agency. This process continues until the account is paid or legal action is taken against the consumer. 

Collection agencies don't want you to know that as a consumer you have a legal right to question the validity of a collection agency which is called debt validation.  Many consumers have paid money on delinquent accounts to a particular company only to find out that the company did not legally have a right to collect money on that account.  As a result the consumer still owed the money on the delinquent account. To prevent this from happening to you, here are 7 ways to validate a debt and ensure you are paying the right creditor or collection agency:

1. Request the creditor, collection agency or attorney to provide documentation that the company is authorized to collect on the debt. Ensure the name and address of the collection agency appears on the documentation which should be on company letterhead.
2. Ask for proof of the total amount of the debt including payment history from with the original creditor and status of the account. Verify the documentation against your own records.
3. Request the collection agency to provide the original contract or other documentation showing the agreement you made with the original creditor including the name and address of the original creditor.
4. Ask the creditor to provide a copy of their business license to prove they are licensed in their state to collect money on delinquent accounts. However this varies from state to state.
5. If the creditor use profanity, harasses you, is rude or threatens you inform the collection agency that they are subject to the Fair Credit Reporting Act (FCRA), they might argue and say they are not but they are considered debt collectors and are covered under the act.
6. If the creditor cannot verify the debt they cannot collect any money owed on your account and is not allowed to contact you about the debt.  They also cannot report the account on your credit report.
7. A creditor may respond to your debt validation letter by sending you a summons to appear in court. This is a scare tactic and is illegal.  A creditor has to validate the debt before they can file suit against you.

Keep records of all documentation you receive and all documentation you mail.  Send all documentation via certified mail with return receipt.  If you find that the creditor or collection agency is violating the FCRA you can file a complaint with your local small claims court, notify the credit bureaus and file complaint with the Federal Trade Commission, www.ftc.gov.

Why Most Americans Are in Debt

                                                           

According to a 2014 report by Newsday 1 in 3 Americans have a debt in collection. These numbers are not quite accurate since it does not include mortgage debt. According to Realtytrac, 9.1 million residential homes were underwater in the second quarter of 2014. In addition, the report only reviews data from credit reports. Not all companies report outstanding debt on a consumer’s credit report which includes some medical debt and riskier financial products such as payday loans. According to Experian, 64 million American have no credit file or a thin credit file.  Those with no credit file may owe debt which is not factored into the report data. 

Why Americans are in debt

• Healthcare costs have increased 113% since 1999 and continue to climb. Premiums are expected to climb another 166% by 2019.
• According to the Annual Survey of Senior Costs, since 2000, the Social Security Cost of Living Adjustment (COLA) has increased benefits 41% while senior expenses have increased 84%. According to SSA.gov, in 2009 and 2010 there was no COLA.  In 2011 it was 3.6, in 2012, 1.7 and in 2013, 1.5.
• According to Forbes.com, college tuition prices increased at a rate higher than inflation for the past 30 years.
• It is getting even harder to make ends meet. In 2014, living costs continue to increase for housing, rent, airfare, clothing, tobacco, food, gas and utilities according to usinflationcalculator.com.
• Americans incurred at lot of debt during and after the recession and still owe on those debts.
• Some consumers may not be aware that they have debt in collections. Some consumers only become aware when they apply for credit or get a copy of their credit report.
• According to a 2009 Federal Trade Commission report, debt collectors search methods have improved for finding people who owe money.
• Couples with children or single parents have greater expenses and more debt than those who don’t have children.
• In 2011, credit card companies loosened their rules for approval which allowed more people to borrow money and get in debt.
• In many instances consumers receive a medical bill for service even if the consumer is not responsible for the bill. As a result consumers are forced to pay the account. Medical debt is an unforeseen expense as consumers do not know when they will become ill, if their insurance will cover a specific charge or how much they will be responsible for until a bill arrives in the mail or until a collection account appears on their credit report.
• Debt is incurred by parents helping their children or family members who experienced a financial crisis.
• The sandwich generation who are helping their children and parents financially are getting further in debt.

What Can Americans Do To Fix It

• Review. Get a copy of your credit report at least once a year.
• Verify. Ask for a debt verification to verify you owe the debt. The company should send an original bill or an itemized list of charges you owe on company letterhead.
• Plan. Setup a payment plan you can afford to pay the debt. Ask the company to confirm the agreement in writing and update your credit report once the account is paid in full.
• Seek professional help. If you are able to negotiate or manage your debt on your own contact a credit counseling agency, credit counselor, financial coach, or financial planner for assistance.
• Downsize or downgrade. Downsize or downgrade your lifestyle. Reduce spending by 30-50%.  Move to a less expensive area or trade in your car for a cheaper one to save money. Downgrading your lifestyle requires making small changes like taking your lunch to work or reducing your cell phone plan.
• Income. Earn extra income to pay down debt.
• Live like a college student. While you were in college you didn't have a lot money and did whatever you could to get a meal and make ends meet. That same philosophy can be applied to reduce your monthly expenses until your financial situation improves.
• Pay more. Pay more than the minimum monthly payment. Pay the balance in full each month or pay multiple times a month. Divide the monthly payment by the number of weeks in the current month and send that amount each week.
• Crowd funding. Use crowd funding websites to get free money to pay down your debt such as Prosper, IndieGoGo and Kickstarter.
• Valuable. Sell something you believe is valuable such as: jewelry, art, furs, etc. and use that money to pay down debt.
• Taxes. Adjust your tax withholdings to get extra money during the year instead of waiting until February or March to get a huge tax refund. Use the extra money to pay down debt.
• Voluntary Simplicity Movement. Buy nothing new other than food and basic necessities - donate existing possessions to charity. Focus on being needs versus wants.

When paying debt know your rights regarding debt collection

FCRA

• Creditors cannot call before 8am or after 9pm but can call Monday-Sunday.
• Creditors must accurately report payment history on your credit report.
• Creditors cannot threaten, use profanity, insult or act in an unprofessional manner.
• Creditors can contact your neighbors to get your contact information but cannot disclose any information.
• Creditors must accurately report information – no errors or duplicates.
• Creditors can only report negative information for up to 7 years.
• Creditors must correct inaccurate information within 30-45 days and send an updated credit report.

FDCPA

• Creditors must respond within 30 days regarding disputes on your credit report.
• Creditors must accurately report information – no errors or duplicates.
• Creditors must provide a reason why you were denied credit.
• Creditor must notify you in writing of your obligation to pay a debt.

CARD Act of 2009

• Prohibits interest rate increases on existing balances.
• Credit card payments are applied to higher balances first.
• Consumers are given a reasonable amount of time to make payments.
• Monthly statements must list time and due date.
• Students can elect to receive solicitations, prohibits increasing limits, max limit $500, proof of income, credit history
• Consumers must opt-in for over the limit charges
• Consumers can get a free credit report if denied credit or unemployed

9 Reasons You Can't Hide From Your Debt

                                                            

Technology has allowed creditors, debt collectors and some state taxing authorities the ability to search for consumers on the internet use social media networks such as Facebook, Myspace,Twitter, Linkedin and other sites to find consumers.  This seems extreme but it is legal.  

According to the Fair Debt Practices Collection Act, debt collectors can contact your family and friends to find your location or get other personal information such as your address, email address or phone number.  If you posted your contact information including your current employer on your social media profile you may soon be getting emails, phone calls or visits from your debt collectors. What if a debt collector contacted someone who is listed as a friend on your social media profile? How embarrassing would that be?  With the frequent consumer data breaches and lack of strong security protections on Facebook and other social media profiles it is not too hard to find anyone these days.

If you use social media networks and are in debt, you presence on them can increase your chances of your creditors and debt collectors finding you.  The IRS has not confirmed whether they use social media networks to find taxpayers who owe back taxes but I assume they probably do.  However, tax agents cannot friend a consumer who owes back taxes on a social media site but that probably doesn’t stop them from doing it.  Here are some ways you can be found on the internet:

1. Internet search engines
2. Motor vehicle records
3. Chat rooms and forums
4. Social media networks
5. Employment records
6. Tax records
7. Bank records
8. Public inquiries at local businesses such as groceries stories, barbershops, church meetings, social and civic meetings, etc.
9. Posts you made about an article or video or post you made on a website

Contact your creditors and debt collectors before they contact you to setup a payment plan or request a financial hardship.  Follow-up with a letter confirming the agreement and stick to the agreement.  It is better to be safe than sorry.