Are you wondering if you should not pay a debt collection agency? While some advise not to pay, the answer isn’t always so simple. If you’ve recently received a notice from a debt collector regarding an overdue account, you may be uncertain about what to do next.
While you can use this 11 word phrase to stop debt collectors today, you still may owe the debt. And while it’s typically your responsibility to pay off any debts you owe, there are certain situations where paying a debt collection agency may not be your best course of action.
In this article, we’ll explore how a debt collection agency obtains your debt, the circumstances in which you may want to hold off on paying, and reasons why it may be beneficial to settle the account. So, let’s dive in!
Understanding Debt Collection Agencies
A debt collection agency is a third-party business that specializes in collecting overdue debts (even medical debts) on behalf of original creditors. Unlike traditional lenders, debt collection agencies don’t actually give out loans. Instead, they purchase delinquent accounts from creditors at a discounted rate and then attempt to recover the unpaid debt from the debtor.
Let’s say you owe $1,000 to a creditor but default on your payments. In this scenario, the debt collection agency might purchase your account for $200, hoping to collect at least $500 from you. Keep in mind that debt collection agencies typically buy accounts at a loss to creditors.
Once a debt collection agency has acquired your account, they’ll start their collection efforts. This usually begins with a letter informing you of the transfer of ownership and their intent to collect the debt. The agency may also offer payment plans as an option. If there’s no response, they’ll begin contacting you more persistently, often by calling your phone number daily. However, they must abide by the guidelines set by the Fair Debt Collection Practices Act.
If you still avoid contact with the agency, they may take further action by reporting your delinquent account to credit bureaus, which may negatively impact your credit score. If this still doesn’t lead to payment, the debt collection agency may file a lawsuit against you with the intention of obtaining a wage garnishment or levying your bank accounts.
Are you obligated to pay debt collection agencies?
If you’ve received a call from a debt collection agency, you might be questioning whether or not you’re obligated to pay them. After all, you never borrowed from them or entered into a financial agreement with them. Instead, your relationship lies with the original creditor. This ethical dilemma leads many to wonder if it’s fair to repay the agency and not the creditor.
Moreover, the agency purchased the account at a fraction of the original debt. This fact alone may make it difficult to ethically justify repaying the agency instead of the creditor. However, from a legal standpoint, once the original creditor sells your account to the debt collection agency, the agency legally owns your debt and can demand repayment. You’re still obligated to repay your debt even though the account has changed hands.
So while it may seem unfair or unethical, legally speaking, you’re bound to repay your debt to the collection agency. Keep in mind that ignoring their collection attempts may result in further legal action and negatively affect your credit score.
If you are nervous to deal with a debt collector, check out our guy how to deal with debt collectors.
Reasons Why You Shouldn’t Pay A Debt Collector
It’s not uncommon to feel uneasy about making payments to a company you’ve never heard of before, especially when it comes to a debt collection agency. While these companies may legally own your debt and have the right to demand repayment, there are a few reasons why you might consider not paying.
Reason 1: You Don’t Have the Means
If you’re unable to make any payments, then it’s impossible to pay your debt. However, keep in mind that you’re still liable for the debt, and the collection agency will likely resort to other tactics to collect the debt. If you’re experiencing financial difficulties, it’s worth reaching out to the company to see if they offer alternative payment arrangements.
Reason 2: The Debt Isn’t Yours
If a collection agency attempts to collect a debt that isn’t yours, it’s important not to make any payments until you’re certain that the debt is yours. Don’t fall for scams or mistakes that could lead you to pay for something you don’t owe.
Reason 3: You’re Hoping to Settle
If you’re hoping to settle a debt, not paying may be a recommended option. Companies typically won’t settle with people who are making regular payments, so not paying may be a viable option. However, don’t withhold payments thinking you might want to settle. Work with a debt settlement company or create a plan for debt settlement before taking any action.
Reason 4: Expired Statute of Limitations
Some debts have a statute of limitations, and once that time has expired, a debt collection agency can no longer sue you. While you’re still technically liable for the debt, there won’t be any legal repercussions for non-payment. If the statute of limitations is close, you might consider not paying and seeing if you can make it past the expiration date. Keep in mind that any payment made will reset the statute of limitations.
Reason 5: No Proof of Ownership of Debt
It’s important to ensure that the collection agency owns the debt before making any payments. Request documentation that shows the company legally purchased the account and owns the debt. The burden of proof lies with the debt collection agency, so if they can’t prove ownership of the debt, it’s best not to make a payment.
Reason 6: Your Facing A Financial Hardship
If you’re facing financial hardship and are struggling to make ends meet, paying off a debt collection agency may not be a priority. In this situation, it may be more important to prioritize essential expenses like rent, utilities, and food. You can try to negotiate with the collection agency and explain your situation, and they may be willing to work out a payment plan or even settle for a lower amount. However, if you’re unable to make any payments, it may be best to focus on addressing your financial hardship first.
When Should You Potentially Pay A Debt Collection Agency?
While there may be reasons not to pay a debt collection agency, it’s important to keep in mind that you’re still legally obligated to repay the debt you owe. Once a debt collection agency legally purchases your debt account, they have the right to collect on it. Here are some reasons why you should consider paying your debt to a collection agency.
Option 1: You Want to Improve Your Credit Score
If your delinquent account has been reported to credit bureaus, it can negatively impact your credit score. Paying off the debt will show up as a positive mark on your credit report and help improve your credit score. This can be particularly important if you’re planning on taking out a loan or credit card in the future.
Option 2: You Want to Avoid Legal Action
If you continue to ignore debt collection attempts, the collection agency may take legal action against you. This can result in wage garnishments or bank account levies, which can cause further financial difficulties. By paying off your debt, you can avoid the legal action and any additional fees or expenses that may come with it.
Option 3: The Agency Proves Ownership of the Debt
If the debt collection agency can prove that the debt is yours and that they own the account, it’s important to resolve the debt. Ignoring it may lead to a lawsuit, so it’s best to figure out a way to repay the debt or negotiate an alternative payment arrangement. Paying off the debt will stop collection attempts and allow you to move on with your life.
Option 4 You Want to Resolve the Issue Quickly
If you have the means to pay off the debt and want to resolve the issue quickly, paying off the account may be the best option. It’ll stop all contact with the collection agency and prevent any future collection attempts.
Conclusion
While debt collection agencies may legally own your debt and have the right to collect on it, there are some situations where it may not be worth paying them. If you’re unable to make payments due to financial hardship, the debt isn’t yours, or the statute of limitations has expired, it may not be necessary to pay off the debt. However, if the collection agency can prove ownership of the debt, you want to improve your credit score, or you want to avoid legal action, it’s important to resolve the debt. Ultimately, it’s up to you to weigh the pros and cons and decide if paying off the debt collection agency is the best course of action for your financial situation.