Regarding debt collection and the advice “just pay it”
Quite frequently I receive phone calls from potential clients who, having called another attorney to ask what they should do about a debt collector calling them, were told “just pay the debt.” This is a terrible answer, and could even the attorney delivering this advice up to potential liability.
The debt collection industry is largely comprised of a lot of debt buyers buying pages and pages of debt from one another. Any given consumer’s debts have typically passed through anywhere between two and seven different debt collectors’ hands by the time they call my office.
Because of this, a consumer can rarely be certain the debt collector on the other end of the line (1) actually owns the debt; (2) is entitled to collect the debt and the charges they are seeking to collect; and (3) is not trying to collect a debt outside of the statute of limitations.
I see and hear of many instances where a consumer “just pays the debt” only to receive a call two months later from another debt collector about the same debt. Which collector really owned the debt? Did the first sell the supposedly-settled debt to the second after receiving payment? It happens more than you might suppose, whether because of a computer or filing glitch, or for some ulterior purpose.
A consumer has the right to receive proof that the debt collector owns the debt. And even if the consumer recognizes the debt and believes he or she owes it, they should request, at a minimum, some proof of ownership. If the consumer does settle the debt, he or she should demand a written receipt and confirmation that the debt has been settled in full. Most debt buyers pay pennies on the dollar, and an attorney can often help the consumer—while being careful to comply with the Credit Repair Organizations Act—negotiate a much-reduced settlement. It is especially important to get such a settlement confirmed in writing as paid in full, or the consumer may hear from another debt collector trying to collect the principle minus the “payment” made by the consumer.
If the consumer does not believe he or she owes the debt, does not recognize it, or if there are other circumstances that make the validity of the debt uncertain, the consumer should request further validation, including a chain of title or assignment with all documents showing that this debt travelled with each sale, a copy of the agreement by which the consumer agreed to be bound, and a copy of at least some statements showing charges or payments on the debt.
Further, if the consumer says the debt collector is harassing them by calling frequently, using foul language, lying, making threats of criminal prosecution, or making other communications prohibited by the Fair Debt Collection Practices Act, the case must be analyzed for FDCPA violations. Consumers are entitled to significant compensation, including attorney fees, if a debt collector subjects them to illegal collection behavior.
In sum, “just pay the debt,” is terrible advice. In some cases, paying—or settling—the debt may be the consumer’s best option, but not before they have learned more about the origin and ownership of the debt, and not before they have been advised that if they will settle the debt, they need to insist on written confirmation of the payment and that the debt has been settled in full.
In some cases, the consumer will find the debt collector is uncooperative or is unwilling or unable to provide the necessary documentation. In these cases, an attorney can help the consumer defend him- or herself in any subsequent debt collection lawsuit, or bring a declaratory action to declare the debt invalid. If the debt collection also involved violations of the FDCPA, the consumer may be able to recover any attorney fees in a FDCPA lawsuit.
Hi Sam -
I’ve read your blog as well as your guest spots on the Consumerist for quite some time. This particular entry of your’s has provoked me to respond and perhaps seek advice, if possible.
To set up the scenario briefly, I was involved in a backyard lawn mowing accident (did you know toes sound like cracking tree branches when the mower’s blade hacks into them?). I had no health insurance coverage. Because I had no insurance, I was able to apply for “assistance” with a few of the organizations involved with my delivery to the hospital, surgery, recovery, et cetera.
$18000 (for 3 left toes of my right foot) total was knocked down to about $10000. I and thankful and grateful for the decrease, but still face paying something I have no idea how to pay. I began paying 3 debtors $20 per month and yet the debt was still sold off after communicating that I was paying as much as I could while still attending college full time, working full time and taking care of my wife and daughter (not trying to turn this into a sob story).
Lo and behold a hail storm damaged our one and only car. We took the check from the auto insurance company and paid 2 or the 3 debtors off. Today, $8300 remains outstanding. I had attempted to sue the homeowner’s insurance company as I was renting the house where the accident occurred. Stupid, lazy me missed the deadline for the statute of limitations. So any hope of obtaining a settlement (in my wildest dreams) is now out.
I have been trying to educate myself on this topic of personal debt/medical debt/collections since my accident. I have learned, as you have stated in this entry, that debt collectors buy debt from organizations for pennies on the dollar. With this knowledge, I am attempting to “just pay it,” but at a reduced cost. I will start out with an offer of less than half and see what goes from there. To avoid possible harassment from the debtors, I am communicating via certified U.S. Postal mail.
My proposal raises this issue: I don’t have cash to offer. I want my offer to be on a credit card. If they accept my offer or mutually agree on a different amount, I will get it in writing from them and provide my credit card information. Not too much information though. But who is to say they won’t attempt to max out my card once they get the number? Am I wrong for attempting to try this? Can any other readers offer constructive advice?
Sorry for the long post, however, I appreciate the chance to offer my input. Thank you.
If you get everything in writing, at the very least you will have recourse if a debt collector does max out your credit card.
On the other hand, there are a lot of very good reasons not to pay one unsecured debt with another unsecured debt. Pay what you can afford with a check or money order. The interest on the debts you owe is probably accruing at a rate lower than the rate you would pay if you paid them off with a credit card, although the laws in your state certainly vary on that point.
[...] does this mean for a consumer? Before you agree to pay any debt, make sure that you owe the debt and that the debt collector on the line actually owns it. And if you do decide to settle an account, know that the debt collector should take into account [...]
8months ago my attorney withdrew 1.5 months prior to final orders (I ran out of money) Im an unemployed Military Retiree! He continued charging me even 10 business days after the withdrawal and added a further 2,424.67 which I only found out yesterday he is collecting thru another attorneys office. I feel like I’ve been cheated because he quit on me without finishing the divorce that I supposedly had paid for. I did not know I owed him any money until today 8 months later! Should I even bother to fight this by retaining ANOTHER Attorney just to find out I have to pay it anyway? Is small claims an GOOD option or a bad one?
Hi John:
Thanks for your post. However, we do not give advice on this public blog. If you are in Minnesota, you are welcome to sign up for a 30-minute consultation with me.
Otherwise, look for a consumer lawyer in your state.
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