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How to get ahead of late fees

Is There a Service That Helps You Not Pay Bills

Is a Debt Owed

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What to do if your account is turned over to collections

Q. We have been making payments on an account for the last 6 months, and it was suddenly turned over to collections.  What can we do?

A. Your best course of action will depend on what kind debt this is, the balance on your account, the size of payment you were making, and if you made the payment every single month.  In fact, these factors may explain why your account was turned over to collections in the first place. 

As a first step, I suggest you contact the primary creditor and ask why your account was turned over to collections and if they would be willing to pull the account back. At the same time, you need to be sure that the payment you are making demonstrates your best effort and fits into the creditor’s policies.

Consumers often believe that all creditors have the same payment policies, but this isn’t the case.  If you do not pay a bill in full, and you opt to make monthly payments instead, the creditor is extending you credit. Given this, you cannot assume your creditors will accept any payment you want to send them.  

If you send a creditor a $5 payment on a $500 bill, it is unlikely they will accept the payment.  What do you have the ability to repay - $25, $50, more?  If it is a debt of yours, you have an obligation to make your best effort to pay the bill as quickly as you can. 

Before sending monthly payments to a creditor, contact them to discuss your options. How fast do they expect the bill to be repaid:  immediately, 3 months, 6 months, 1 year?  Do you need to fill out a financial statement if you are expecting them to take monthly payments?  What proof will you need to provide them if you need to make monthly payments? When you commit to a payment amount, you need to send it every single month. If you miss a payment or two, your account may be turned over to collections. 

In January, the Consumer Financial Protection Bureau (CFPB) released a report on Consumer Experiences with Debt Collections.  One in three consumers indicated that they had been contacted by at least one creditor or collector attempting to collect on one or more debts.  Past due medical bills, credit cards and student loans were among the most frequently cited debts consumers were contacted about. 

More than half the consumer contacted about a debt in collection indicated the debt was not theirs, so before you take any action on this account, you need to check your records carefully. The report also stated that consumers tend to take a more favorable view of creditors seeking to collect a debt than of a debt collector – something creditors should take note of when their customers and their reputation are important to them. 

If you are having trouble making your monthly payments, you may want to contact your nearest accredited non-profit credit counseling for a no-charge financial review to discuss your best options.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email acce@acce-online.com.

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.