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The original creditor is the company that gave you the loan or credit. An original creditor may attempt to collect a past due debt or account itself, or it may hire a debt collector. A debt collector is generally a third party who has been contracted to collect your debt or account. The name of the
company contacting you about an unpaid debt may be different than the original creditor who gave you the loan or credit. The original creditor also may sell your debt or account to another party who may then collect the debt or place it with a different debt collector. Collection agencies ask you all kinds of intrusive
questions about your finances, but they are usually not especially forthcoming about how your debt became their business in the first place. There are several ways that a collection agency can get the right to seek payment of a debt from you. The trouble is that most collection agencies are so unpleasant that most people respond to communications from collection agencies by ignoring written notices and blocking phone numbers, or else by unleashing their vitriol. The backstory
of how your debt ended up with the agency can make a difference as to the best way to respond to the collection agency. Sometimes contacting the original creditor is the best way to settle the debt, but what you should say to the original creditor depends on the circumstances. A Philadelphia consumer law attorney can help you develop a strategy for dealing with debts that have gone to collection agencies. What Happens to Your Debts When You Don’t Pay Them? When you are late paying an installment on a debt (it can be a credit card balance, a medical bill, or almost any other kind of debt), the creditor will start by sending you additional reminders; they might also charge late fees. If four months go by without you making any payments, the creditor might decide that it is not worth the efforts of its billing department to keep trying to collect the debt from you; this is sometimes referred to as charging off your debt. If this
happens, one of two things can happen, both of which involve collection agencies. In the first scenario, the creditor assigns your debt to a collection agency, but the creditor still owns your debt. The collection agency might be willing to negotiate with you to settle the debt for a lower amount, either by a lump sum payment or installments. When you pay, the creditor still gets some money. In the other scenario, the creditor sells the debt to a collection agency. In other words, the collection agency settles the debt with the creditor for a lower amount than the face value of the original debt. Then it tries to collect payment from you to get a return on the investment it made by buying your debt. Can You Still Pay the Original Creditor After Your Account Goes to Collections? When you get a notice from a collection agency, call the original creditor and ask if they still own the debt. If they do, try to negotiate a manageable payment plan directly with them. If they have sold it, you may be able to convince them to buy your debt back. To make sure that you don’t end up in debt both to the original creditor and to the collection agency, contact a debt settlement lawyer. Contact an Attorney Today for Help A Philadelphia consumer attorney can help you settle your debt with collection agencies or with the original creditors. Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation. Resource: equifax.com/personal/education/covid-19/debt-collectors-vs-creditors/  Consumer Law PA | Posted on September 7, 2021 In this article:
To many of us, the word "collections" sends shivers down our spines. You've fallen behind on paying off a debt—maybe one of your credit card bills—and now a debt collector wants you to pay up. Thankfully, you can get rid of those shivers by taking responsibility for the debt and taking steps to erase it. Read on to learn how you can clear out the obstacles, clear away the debt and clear your conscience when your account goes to collections. Why Do Debts Go to Collections?Typically, a debt collector—either a person or a company—reaches out to you when you owe a debt that's gone unpaid for some time, generally after you've missed three or more monthly payments. Two possible scenarios are:
A debt collector can contact you by phone, email, mail or text message when it's trying to collect payment for your overdue bills. When a debt collector initially contacts you by phone, ask
that the details about your debt be put in writing. Hang on to any written correspondence you receive from a debt collector. Within five days of its initial contact with you, a debt collector must tell you in writing the amount of the debt and the name of the creditor, and must inform you about how to dispute the debt. What Should You Do When You Find Out Your Account Is in Collections?1. Don't Ignore the DebtWhen you're being hounded by a debt collector, it might be tempting to avoid collection calls or rip up collection letters. Unfortunately, that won't make your debt go away. It's best to take control of the situation and confront the debt head on. That way, you can get some peace of mind and minimize harm to your credit. It's comforting to know that the federal Fair Debt Collections Practices Act prevents debt collectors from engaging in abusive, deceptive or unfair debt collection methods. For instance, they can't swear at you over the phone or threaten to throw you in jail if you don't pay. They also can't call you before 8 a.m. or after 9 p.m. unless you give permission. If you're not able to take calls at work, a debt collector can't contact you there. 2. Deal With the Creditor FirstFor several months after your debt has gone unpaid, an in-house debt collector working directly for the creditor normally will be the one reaching out to you about your debt. After that, the creditor might sell the debt to a debt collection agency or another outside company. Your debt even can be sold by one debt collection agency to another debt collection agency. 3. Ask the Debt Collector to Stop Contacting YouUnder federal law, a debt collector in most cases must stop contacting you when you request so in writing. After it receives your written request, a debt collector can contact you to verify that it won't contact you anymore or that it's filing a lawsuit against you. Keep in mind that halting a debt collector from contacting you does not wipe out your debt. A debt collector can still report to a credit bureau that your debt has gone to collections, and it can still sue you to recover the debt. 4. Look Into Negotiating the DebtUltimately, a creditor or debt collection agency wants to get its money. Therefore, it might be willing to negotiate a lump-sum payment or a plan to pay off the debt over time. Before you start negotiating, figure out how much of the debt you can pay at one time or over a number of months. Then, propose an amount of money you can reasonably pay, based on your income and expenses. A debt collector might accept 75% of your $3,500 credit card debt, for example, or might agree to an 18-month payment plan for the $2,000 you still owe on a personal loan. 5. Be Sure You Know Whom to PayOnce you've arranged to pay off the debt, who should receive your debt payments? If the original creditor, such as a credit card issuer or mortgage lender, is handling the debt collection, then your payments will go to the creditor. But if the original creditor hires a debt collector or sells your debt to a debt collector, you'll send payments to the debt collector. 6. Consider Disputing the DebtBeing contacted by a debt collector is no fun. But it can really be annoying if they're contacting you in error. If that occurs, mail a letter to the debt collector stating the amount they're saying you owe is incorrect. You should also ask for proof of the debt collector's claim that you owe money, such as a copy of a credit card bill. Be sure to keep a copy of the letter. The federal Consumer Financial Protection Bureau offers a sample dispute letter on its website. What happens if you and the debt collector can't settle the dispute? It might be time to bring in a third-party arbitrator. The arbitrator will weigh the evidence, such as proof that you paid all or some of the debt, and listen to both sides of the story before issuing a ruling. 7. Think About Hiring an AttorneyIf the situation with a debt collector gets messy—particularly if the debt collector is suing you—then you might want to hire an attorney to represent you. Once you hand the matter over to an attorney, all communication must be between the debt collector and the attorney. Another option: Ask for help from a nonprofit credit counseling service. A credit counselor can work with you on a debt payment plan and a household budget. Don't delay in seeking help, though, as waiting too long could land you in court. What Happens if You Don't Pay a Debt Collector?In some cases, a debt collector might take you to court and request that a judge order you to pay the debt. You can represent yourself in court or hire an attorney. As part of the legal case, the debt collector must show that the debt is valid and that you're the one who owes it. Based on that and other evidence, a judge will rule whether you do or do not owe the debt. While it's scary to go to court, it's not wise to ignore the lawsuit. In fact, ignoring a suit against you often worsens your situation. Typically, a judge will rule against you if you don't respond to the legal action. That could let a debt collector:
To stay out of legal hot water, face the consequences rather than hoping the lawsuit will simply go away. On a positive note, a debt collector might not be able to take you to court over old debts. Why? Debt collectors have a certain window of time to sue you. In most
states, that window is three to six years. How Do Collections Affect Your Credit?Once your overdue debt is handed over to an internal or external debt collector, this action probably will pop up on your credit reports. A collection account on your credit can lead to a significant drop in
your credit scores. It'll take seven years for accounts that have gone to collections to fall off your credit reports. How to Get Through the Collections ProcessWhen one of your debts winds up with a debt collector, you might feel helpless. There are plenty of reasons to be hopeful, though. The way you react to this can empower you to come through this with your head held high:
Is it better to pay debt collector or original?Working with the original creditor, rather than dealing with debt collectors, can be beneficial. Often, the original creditor will offer a more reasonable payment option, reduce the balance on your original loan or even stop interest from accruing on the loan balance altogether.
Do original creditors remove collections?If you have an excellent credit history, you may be able to get the original creditor or collection agency to remove the derogatory mark as a favor or act of “goodwill”. You'll generally have to pay the collection account off first, though, if you haven't already done so.
Why is it not good to pay off collections?However, a collection debt is one of the worst types of unpaid debts on your credit report because it indicates that the lender has given up on your debt (written it off) entirely. A collection account will usually stay on your credit report for seven years from when you stopped making payments.
Can a collection agency charge more than the original debt?Debt collection agencies are legally allowed to add additional interest and fees to your overall balance. This eventually leads to the total amount being more than what you owed to the original creditor. There are federal and state laws that govern how collections are handled.
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Should i pay a collection agency or the original creditor
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