HOW TO HANDLE THIRD PARTY COLLECTION ACCOUNTS
Updated: Mar 31, 2022
A third party collection is an account that is past due 120 to 180 days or more and the original creditor has given up hope of receiving any form of payment. When this happens the original creditor turns the account over to a third party to collect on the debt. The debt can be turned over to a debt collector or sold to s debt buyer.
WHAT IS A THIRD PARTY COLLECTION?
A third party collection is a past due account that has been charged-off by the original creditor. Most likely, no payment has been made on the account in the last 6 months or more. The account has either been assigned to a third party debt collector to collect or "SOLD" to a debt buyer.
CAN THIRD PARTY COLLECTIONS BE DELETED?
The Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and Credit Reporting Resources Guide (CRRG), to name a few, were put into law to protect all consumers from unfair credit reporting. ALL consumers are entitled to an accurate, complete, and verifiable credit report.
YES!!! Any item reporting on your credit report that is inaccurate, incomplete, or unverifiable can be Deleted!!! Any item not reporting up to credit industry standards can be challenged and removed from your reports.
You have the right to request verification from Equifax, Experian, Transunion, the original creditor, the furnisher, or anyone reporting consumer credit data information about you. Any information reporting on credit reports should be reporting with maximum accuracy.
When challenging third party collections on your credit reports you should always challenge the information with whomever is furnishing the information. You should challenge the credit bureaus and third party collection company reporting the information. The law states that any disputed information by a consumer regarding inaccuracies on their credit reports cannot be ignored.
When challenging the credit bureaus always clean your personal identifiers first, then challenge the account. When challenging information with the third party collection company that is reporting the debt always send your challenges certified.
WHAT HAPPENS AFTER A THIRD PARTY COLLECTION IS DELETED?
"What happens if a third party collection is deleted from my credit report? Do I still owe the debt?" If a third party collection has been removed from your credit reports, CONGRATULATIONS! Now what?
If a third party collection is deleted from your credit reports you still be legally liable for the debt, and have to pay it. Even if a collections is removed from your credit reports you may still be responsible for the debt depending on your state's statute of limitations. The statute of limitations is also determined by what type of an account it is. Whether is is oral, open, installment, etc.
Normally if the third party collection that was deleted is less than $2,000 you could be safe from the creditor filing a complaint and suing you in court. Although that is true, that will not stop the third party collection agency from selling your debt to another party, and in return that third party collection agency can place the account back on your credit reports as a new collection.
To prevent that from happening you could make a settlement with the collection company if you are sure the debt belongs to you.
But, you could also dispute or challenge the collection account with the new owner. 9 times out of 10 of the last third party collection company did not have the documentation to validate the account, the new collection company reporting the debt will not have it either. Meaning all you would need to do is request validation again from the new third party collector.
SHOULD I PAY THIRD PARTY COLLECTIONS?
Whether or not you should pay a third party collection is going to depend on several factors, but we will be discussing the top five below.
Is the third party collection inside the statute of limitations?
What type of company owns the debt?
Does the debt belong to you?
Is the debt reporting correctly?
Has the collection been properly validated?
Is the third party collection account inside the statute of limitation (SOL)?
Determining whether the account is inside or outside the statute of limitations will determine how you should handle the account. Whether you should pay the collection or offer a settlement. If you have to make a settlement the statute of limitations will determine how you negotiate your settlement offer.
If the account is inside of the SOL you may have to make a payment to stop a judgement if you are sued, or if you make a settlement you may be required to pay a high percentage of the balance of the debt that is owed.
If the account is outside the SOL you are no longer legally liable for the debt. If this is the case and the account is outside of the SOL it can still report on your credit reports for the allotted amount of time, which is seven years from the date of your last payment or date of first delinquency.
FYI: Paying a third party collection does not guarantee the account will be deleted from your credit reports and it does not guarantee that your credit scores will increase. When paying a collection your score can either increase, decrease, or stay the same depending on your personal credit profile.
Who is collecting on the account? Third party debt collector or debt buyer?
A third party debt collector and a debt buyer are both different. The debt buyer may also act as the debt collector or get a third party debt collector to handle the account.
Does it really make a difference who has the account? "Yes, it does." Depending on who has ownership of the account will determine how you should handle the account.
There is one major difference between a debt collector and debt buyer. A third party debt collector normally does not own the debt and are attempting to collect the debt on behalf of another entity. A debt buyers business is to purchase debt, an most times they purchase bad debt in bulk.
It is also a good idea to check with your state to make sure that the company trying to collect on the debt is authorized to do business in your state or collect debt in your state. This can be done from you secretary of state's website.
Does the third party collection account belong to you?
Before paying any third party collection account make sure the collection actually belongs to you, and not a relative or someone with a similar name as yours. Also do not forget to check the SOL in your state to make sure you are still legally liable.
Is the debt reporting correctly?
By law you are entitled to a fair and accurate consumer credit report. Before paying a collection review how the item is reporting on your credit report. By doing so you should be able to identify the type of collection account it is and who the original creditor is. ALWAYS check your balance to ensure it is reporting correctly.
IMPORTANT CREDIT REPORTING GUIDELINES FOR THIRD PARTY COLLECTIONS:
Your entire account should be reporting with no abbreviations or symbols.
No past due amount should be reporting.
Your monthly terms should be reporting as 1M.
Payment history should be blank filled.
The original creditor's name should be listed, unless it is a medical collection and by using the facilities name would should what type of treatment as received, in those cases the original creditor's name is not listed.
If you find errors reporting on your credit reports by law you could be awarded up to $1000 for every error reporting.
Has the debt been properly validated?
When requesting validation for a third party collection there are several guideline that the Fair Debt Collection Practices Act states must followed.
(a) Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this subchapter may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.
(c) Admission of liability The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
(d) Legal pleadings A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a). (e) Notice provisions The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by title 26, title V of Gramm-Leach-Bliley Act [15 U.S.C. 6801 et seq.], or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.
For medical debt to be properly validated, the documents requested must come from the medical facility on their letterhead. The third party collection agency simply just sending you a typed up itemization from their computer is not sufficient.
BONUS:
Sometimes in order to get a third party collection deleted from your credit report you may have to request a pay for delete. That means that after you have satisfied the debt it will be removed from your credit reports. There are a few companies that offer this service. For the Top 15 Companies that offer pay for delete options click HERE.
CONCLUSION
Paying third party collections depends on a lot of factors. Is the account yours, is it reporting correctly, has it been validated, is the account inside the statute of limitations, and even what type of company is trying to collect on the debt, as well as background information about them. All of this information is important and should be used when determining whether or not to pay a collection.
Whether or not you pay a third party collection is going to be a personal decision but all factors listed above should be taken into consideration. If you need a professional company who specializes in third party collections contact THE CREDIT LABORATORY today. One of our friendly specialist will be happy to speak with you about your situation.
