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Dealing With a Collection Agency

Written by Nickel - 7 Comments

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A reader that I’ll call Mary recently wrote in with the following question about dealing with a collection agency:

We were in a horrible car accident last year and our car insurance just now paid the car towing company. This company turned our bill over to collection agency which listed this on our credit report. Now… Who does what? The towing company tells collection agency to delete record on our credit report? Or do we need to do something?

We actually experienced something similar when a local medical clinic sent to collections a bill that we had already paid. Based on our experience, I would suggest starting by reading up on the Fair Debt Collection Practices Act (FDCPA).

Once you’ve done that, I would then request validation of the debt from the collection agency. A quick Google search turns up numerous sample letters that you can adapt for you own purposes. As part of your request, it wouldn’t hurt to note that you have proof of payment.

Be sure to send this letter via certified mail within 30 days of the collection agency’s initial contact. The collection agency will then have 30 days to respond. If they can’t validate the debt, they’re not allowed to:

(1) attempt to collect it,
(2) contact you about it, or
(3) report it to the credit bureaus

If they don’t respond, send a followup noting (politely!) their failure to comply with the FDCPA. Further state that they will be in violation of the act if they attempt to collect and/or report you to the credit bureaus (or fail to remove the listing if they’ve already reported you).

In our case, this is as far as it went. We sent the request for validation and didn’t hear anything. I then sent a followup noting their failure to validate the debt, and further stating that we consider the matter to be resolved. We haven’t heard anything since.

In Mary’s case, it would also be worth following up with both the insurance company and the towing company and asking for their help. It’s important to be polite but firm, and to not give up until you get a resolution. Take good notes of every conversation, and provide documentation wherever possible/necessary.

What did I miss?

Have any of you successfully navigated this sort of situation, or otherwise dealt with a collection agency? If so, do you have anything to add?

Published on September 21st, 2009 - 7 Comments
Filed under: Credit Cards,Debt Reduction,Mortgages

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Comments (scroll down to add your own):

  1. While your advice to look at the Fair Debt Collection Practices Act is excellent, you failed to mention a federal law that is even more on point.

    Since Mary’s primary issue is with her credit record you should have also pointed her towards the Fair Credit Reporting Act.

    Again… good advice. It just didn’t go far enough.

    Comment by Anonymous — Sep 21st 2009 @ 8:11 am
  2. I had the “pleasure” of working with a collection agency for a short while between University and jobs and I learned A LOT from the inside.

    In Mary’s case the issue doesn’t seem to be collection agency so much as trying to fix the credit report. (I have a post on dealing with collection agencies

    Getting info off credit report can be a challenging and long process, that’s why I recommend checking credit reports quarterly.

    Was the payment late? If so than the info on the report may not really be wrong so removing it may not be possible.

    Other than that I agree with what nickel says, call both the towing and insurance company and keep calling on weekly bases to resolve the issue. You have to be the proactive one at this stage as those companies will not care a lot. So stay firm and persistence and the issue should be resolved, although it may take sometime.

    Good luck!

    Comment by Anonymous — Sep 21st 2009 @ 8:12 am
  3. Weston: Good point on the FCRA. I was mostly focused on getting the collection agency off her back.

    Here’s a relevant link: link

    Comment by Nickel — Sep 21st 2009 @ 9:04 am
  4. Nice article. Dateline NBC had a nice feature on collection agency under report titles Debt: The next big American crisis?

    Comment by Anonymous — Sep 21st 2009 @ 11:05 am
  5. Your reader can also request copies of their credit reports and dispute the item directly through TransUnion, Experian and Equifax. She can order them through for free providing she has not done so in the past year.

    Comment by Anonymous — Sep 21st 2009 @ 11:07 am
  6. The only thing I would add (and there is an entire legal sub-industry based off of it):


    Comment by Anonymous — Sep 21st 2009 @ 11:55 am
  7. Mary asks the question “Now… Who does what? The towing company tells collection agency to delete record on our credit report? Or do we need to do something?”

    Regrettably, it’s up to her to do something about it. The towing company will likely do nothing without initiaton from her (it’s a backroom opertation for them), and the credit reporting agency is under no obligation to do anything unless someone contacts hem.

    She’ll need to get a letter from the towing company clearing the account, then send a copy to the collection agency and get a letter from them clearing the account. Everything must be done in writing!!!

    Only then, with written evidence in hand (including a copy of the check in payment) should she approach the credit reporting agencies. But there are THREE of them, and unless you clear the account on all three, the collection will continue to appear on her credit report.

    Unfortunately, removing credit isn’t a consumer friendly process.

    Comment by Anonymous — Sep 23rd 2009 @ 11:05 am

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