What Happens If I Pay the Creditor & Not the Collection Agency?

If you neglected to pay a bill for a significant amount of time, don’t be surprised if you receive a bill from a new creditor. Your original creditor likely turned your delinquent account over to a collection agency. If you planned to pay the bill, naturally you may try to remit payment to the original creditor. Not so fast. By paying the original creditor before doing a little investigation, you could end up still owing the collection agency.

TL;DR (Too Long; Didn't Read)

If you pay the original creditor and not the current collection agency, you may still owe the money to the collection agency.

In-House or Independent Debt Collector

If you receive a bill from a collection agency, contact the original creditor. Some businesses have in-house collection divisions, while others send unpaid accounts to collection agencies. You need to determine which of these circumstances applies to the original creditor. If your original creditor has an in-house collection division, you can settle your account by paying the original creditor.

Contractual Obligations

When you received goods or services from a business in exchange for the promise to pay for those goods or services, you created a legally binding contract. Under certain circumstances, a party to a contract can assign the rights or benefits of a contract to another person or entity. This often happens when an original creditor sends your past-due account to a collection agency.

Take this example: You received services from the hospital and signed a contract saying you would pay the hospital. The hospital sent you a bill for $1,000 that you never paid. In an effort to recoup at least some payment, the hospital assigns the bill to a separate collection agency. Now, the collection agency has the right to collect from you.

Debt to Collection Agency

Let’s go back to the hospital example. You receive a bill from the collection agency that originated at the hospital. Therefore, you have received notice that the hospital assigned or sold the account. That means you have a legal obligation to pay the collection agency, not the hospital.

If you pay the hospital $1,000 for the debt, you will still have a legal obligation to pay the collection agency. If you’re lucky, the hospital will send your payment to the collection agency. You should not bet on that happening. The original creditor could keep the money you owe and not inform the collection agency of anything. That will result in a collection agency trying to collect the money for a bill you already paid.

The collection agency can legally report this debt to the credit bureaus. This could hamper your attempts to obtain credit, to buy a new car or even save for the future.

Fair Debt Collection Practices Act

Collection agencies must comply with the Fair Debt Collection Practices Act. Most states allow collection agencies to collect on debts only for seven years past the date of delinquency. However, in their effort to collect more money, collection agencies may re-age your debt and keep up collection actions for longer than the seven-year period. This is illegal. You can dispute these debts on your credit report and file a complaint with the Federal Trade Commission.

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