Yikes is that a collection letter

There may be times when you do not receive a final billing from an insurance claim, you don’t receive the final reading of a utility account, or you are sure you have paid a bill only to receive a disturbing piece of mail a few months later: a collection letter. If you have ever received a letter notifying you that the account you thought you paid has been turned over to a collection agency, you have probably taken the following actions.

  • Called the collection agency to explain your situation.
  • Dug through your old receipts and checking account log to find proof that you paid and sent copies to the collection agency.

For many people, those actions will be enough to prove that you did pay the account on time, clear your name, and cease any further action by the collection agency.

How your account gets turned over to a collection agency

A vast majority of accounts, over 90 percent, are paid on time as agreed by the terms of the contract. Most lenders will grant you some additional time to pay an account but, at a certain point, a lender needs to focus on their core business and will turn the account over to a professional business, usually called a collection agency, to collect the debt. The collection agency is covered by the Fair Debt Collections Practices Act (FDCPA).

The collection agency will sent written notice listing the original creditor, date of service, and amount due. The notice will also contain information about how to dispute the debt. There are specific time frames that you need to follow and, in turn, the collection agency has certain time frames that they must follow.

What to do if you receive a collection letter

If you have received a collection letter, the most important thing to do is stay calm. Look through your payment records to see if you did in fact pay off the account. If you did, make copies of your proof and send them to the collection agency to clear your name.

If after fruitlessly looking for proof that you paid the account you realize that you still owe, the first thing you should do is read and understand your rights under the FDCPA. Next, talk to the collection agency. Be reasonable in your payment offers and do not try to get out of the debt by yelling, swearing, or making excuses. Collectors are doing their job and a vast majority of them are good people, trained to collect bills and work with you if you are willing to work with them.

The prize in all this? Knowing all your bills are paid in full and that your credit report accurately reflects your good payment history.

Cathy Williams is a former writer for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.