Can I Pay My Original Creditor Instead of a Debt Collection Agency?
Dealing with Debt Collectors Can Be a Nightmare – But You Have Options
Being hounded by debt collectors is one of the most stressful financial situations anyone can face. Those constant calls and letters demanding payment can make you feel helpless and overwhelmed. But don’t lose hope – you may have more power than you think when it comes to resolving your debt.One option that many people aren’t aware of is the possibility of paying the original creditor directly, rather than the debt collection agency that has purchased or been assigned your debt. In this article, we’ll explore whether this is a viable path for you and what steps you need to take.But first, let’s start with a quick overview of how debts end up with collection agencies in the first place.
How Debts Get Sold to Collection Agencies
When you fall behind on payments to a creditor like a credit card company, medical provider, or utility, they will make efforts to collect the debt themselves at first. This usually involves letters and phone calls requesting payment.However, if those efforts are unsuccessful after a period of time (often 180 days or more), the original creditor may decide to cut their losses. At this point, they have two main options:
-- Hire a third-party debt collection agency to pursue the debt on their behalf for a fee.
- Sell the debt outright to a debt buyer (a company that purchases unpaid debts) for a fraction of the total amount owed.
In either scenario, the debt effectively gets transferred from the original creditor to a new entity whose sole business is collecting on unpaid debts. This is where things can get really unpleasant for the consumer, as debt collectors are notorious for using aggressive and sometimes unethical tactics to force payment.But what if you could just bypass these debt collectors entirely and deal with the original creditor? Is that possible?
When You Can (and Can’t) Pay the Original Creditor
The answer depends on whether your debt was sold outright or just assigned to a collection agency working on contingency.If the debt was sold, then the original creditor no longer has any legal claim to it – they‘ve washed their hands of it completely. In this case, you cannot pay the original creditor; you have to deal directly with the debt buyer that now owns the debt.However, if the original creditor simply hired a collection agency to pursue the debt on their behalf, then the creditor still legally owns the debt. This means you may be able to negotiate a payment arrangement directly with them instead of going through the collection agency.Of course, the creditor has to be willing to work with you on this. They may prefer to leave it in the hands of the collection agency at that point. But it’s always worth reaching out to ask, especially if you have a plan to fully pay off or settle the debt.Paying the original creditor is generally preferable because:
- They may be more flexible on payment terms than a debt collector
- They are motivated to maintain your business relationship
- Avoiding debt collectors prevents further damage to your credit
So how do you go about exploring this option? Let‘s walk through the steps.
Step 1: Verify Who Owns the Debt
The first step is to determine whether your debt was sold to a third-party or just assigned to a collection agency on contingency. There are a few ways to find this out:
-- Check your credit report – Debts show up separately once transferred to a collection agency, so you can see if a new creditor is listed.
- Contact the original creditor – Ask them directly if they still own the debt or if it was sold. Get the details in writing.
- Ask the debt collector – They are legally required to provide debt validation information if you request it within 30 days of first being contacted. This should clarify the debt’s current owner.
If the original creditor confirms they still own the debt, move on to the next step. But if it was sold to a debt buyer, then unfortunately you have to deal directly with that new creditor going forward.
Step 2: Negotiate with the Original Creditor
Once you‘ve verified the original creditor still owns your debt, you can start negotiating payment terms with them. The goal is to get them to recall the debt from the collection agency so you can pay it off directly.A few tips for fruitful negotiations:
- Get the creditor’s agreement in writing before making any payments.
- Offer a lump sum if possible – creditors prefer getting paid quickly.
- Propose a payment plan you can realistically stick to if you can’t pay the full amount.
- Explain your difficult financial circumstances to gain sympathy.
- Remind them you want to preserve your business relationship.
- Don’t admit to owing the full amount if you plan to try disputing the debt later.
The creditor may want you to settle with the collection agency first before recalling the debt. But it‘s worth pushing to deal with the creditor directly if you can. Debt collectors have much less incentive to accept reasonable payment terms.If the original creditor agrees to work with you, get the details like amount owed, payment schedule, and credit report deletion in writing. Then you can pay them and avoid the debt collector entirely.
Step 3: Or Negotiate with the Debt Collector
In cases where the original creditor is unwilling to take back the debt, you’ll have to try negotiating with the debt collection agency itself. This is usually a bigger uphill battle, but it may be your only option.Some tips for negotiating debt settlement with collectors:
- Don’t give them any money until you have a written agreement.
- Aim to settle for 25-50% of the total debt amount if possible.
- Get them to agree to remove the debt from your credit report once paid.
- Remain firm and unapologetic – they bought the debt for pennies on the dollar.
- Emphasize your financial hardship to gain leverage.
- Use free negotiation services like this one from Upsolve if you need help.
While dealing with the original creditor is ideal, settling with the debt collector for a reasonable amount and getting it removed from your credit may be the best path forward in some cases.No matter which route you take, always get any agreement in writing before paying a penny. Debt collectors are not known for their honesty.
-Know Your Rights When Dealing with Debt Collectors
Whether you end up negotiating with the original creditor or a debt collector, it‘s crucial to understand your rights under the Fair Debt Collection Practices Act (FDCPA). This federal law prohibits debt collectors from using abusive, deceptive, or unfair practices when trying to collect a debt.Some key consumer protections under the FDCPA include:
- Debt collectors cannot call you before 8am or after 9pm.
- They cannot use profane language or threaten violence.
- They must stop contacting you if you send a written request.
- They cannot discuss your debt with others without your permission.
- They must provide debt validation if you request it within 30 days.
The FDCPA gives you leverage to fight back against unscrupulous collection tactics. Don‘t hesitate to file a complaint with the Consumer Financial Protection Bureau (CFPB) and your state attorney general if a collector violates the law.You can find a helpful overview of the FDCPA on the FTC’s website.
When Paying the Original Creditor Isn’t an Option
In some situations, paying the original creditor simply won’t be possible because the debt was sold long ago. If this is the case, you‘ll have to negotiate directly with the debt buyer that now owns your debt.This doesn‘t mean you’re out of luck, but it does put you in a tougher negotiating position. Debt buyers purchase debts for pennies on the dollar, so they have huge profit motivation to collect as much as possible.Your leverage points when dealing with a debt buyer are:
-- Settling for a lump sum amount you can actually afford to pay
- Your financial hardship making further collection efforts futile
- The age of the debt if it’s becoming time-barred in your state
- Threatening to dispute the debt’s validity and force them to prove it
As this Reddit thread discusses, debt buyers may be willing to accept a reasonable settlement to avoid a drawn-out dispute process.You can also look into options like bankruptcy, debt management plans, or trying to validate the debt and force the buyer to prove you actually owe it. Just don’t ignore debt buyers, as they can eventually take legal action.
Statute of Limitations on Debt Can Work in Your Favor
One powerful negotiating tool is the statute of limitations on debt in your state. This is the legal time limit for how long a creditor has to file suit over an unpaid debt.Once a debt becomes time-barred by passing this statute of limitations, you have strong leverage because:
- The creditor can no longer sue you over the debt
- You can force them to validate the debt is still collectible
- They may accept a discounted settlement to avoid a dispute
Statute of limitation time periods vary, but are commonly around 4-6 years for most debts in most states. You can look up your state’s statute of limitations on the Bankrate website.If a debt is getting close to or has passed this limitations period, debt collectors may be very motivated to settle for a lump sum before their legal avenue for collection expires. Use this timing to your advantage in negotiations.
Just be careful – making even a small payment on a time-barred debt can restart the clock on the statute of limitations in some states. So don’t acknowledge or pay anything until you understand the implications.
When to Seek Professional Debt Help
For many people, the debt negotiation process is simply too daunting and stressful to handle alone. The good news is that there are plenty of reputable credit counseling services and debt relief companies that can assist you.Nonprofit credit counseling agencies like Money Management International and InCharge Debt Solutions provide free counseling and can help you enroll in a debt management plan to consolidate payments.There are also debt settlement companies like Freedom Debt Relief that will negotiate with your creditors on your behalf to settle debts for less than the full amount owed. However, these typically charge hefty fees around 20-25% of your total debt load.Before paying for debt settlement assistance, check if you qualify for free help from a legal aid clinic in your area. Many provide debt counseling and negotiation services if your income is below a certain threshold.You can search for free legal aid providers on the Legal Services Corporation website.