Disputing paid collections

Hi Whitmoor,

Can you tell whether or not you have the payment receipts? Moreover you have mentioned that you have paid the original creditors. However, your accounts were in collections. Thus, you were supposed to make payments to the collection agencies.

Thanks,

Aaron

It doesn't matter who was paid they should update the account timely or remove it. If the original credit accepted and cashed the check then you did nothing wrong. I have actually had clients pay OC and have the check returned to them with directions to pay the CA. Send a copy of your canceled check and/or receipt from the OC - see if you can get a statement from them showing it paid. Send a copy to both the CA and the Bureaus RRR and demand the be reverted back to the original creditor and that the collection be removed from your report.

But Katrina, if the debt is with the collection agnecy, the debtor is supposed to pay the collection agency. Is it not? :)

There is a loophole here and I know back about 8-10 years ago if a collection agent was being uncooperative I would suggest my clients (potential homebuyers) demand the debt be returned to the original creditor and dispute the account, request an account detail etc... I will research this later this week when I have time - because back then there was a portion of the FDCPA that supported this action.

The theory is that technically, the debt/contract is with the debtor and the OC - the CA does not have a contract with the debtor it has a contract with the OC. I have only had one or two OC (over 20 years of doing this) send the check back and tell the debtor they could not accept the payment.

That would be great to get some information, ammunition like that especially if you know the fdcpa rules to back it up, I look forward to reading this response.

I could see through reading through many of the posts here where many individuals could use that information. That would be an awesome tool to walk into a mediation with also. Please list the law here to back it up as soon as possible. I have email alert on responses, so hopefully this will let me know when you do.

I read the FDCPA last night and the wording I was looking for wasn't there. I will be going to the storage unit tomorrow and can pull my old notes and see where I got that idea if it was another statute or if it came from my lawyer. Will keep you updated....

I've done that. I've had an old debt, that appeared on my CR. It was the OC and the CA (BOTH) that was reporting it. I couldn't get 'anywhere' with the CA, so,..I contacted the OC, explained I couldn't 'work with' the CA, etc. I paid the account, in full, and the OC 'updated' the debt and removed it from my CR. However......the CA STILL reports it. I called the CA (again) and told him I have documentation I paid the debt with the OC. They said "they don't have a record of it and I was suppose to pay them." They (the CA) wanted to to make a payment with THEM. I'm NOT paying the same debt twice.

Yes, there lies the problem. If the OC does not pull back the account officially from the collection agnecy, the collection agnecy may deny updating the account status.

I found my old notes (from 1996-1997) I was working with an attorney friend of a client. Here is what I was told:

The obligation/contract (written, implied or verbal) for debt repayment is between the OC and the debtor. The CA and OC have a separate contract that usually does not include the debtor.

A credit can hire multiple collection agents to collect on their behalf - this is a contract between the OC and the CA. They can also sell a debt to another company. These transactions are between the OC and CA and usually have nothing to do with the debtor, because the debtor would have to agree upfront to their account being sold - such as a mortgage.

99.9% of mortgages have language in them stating they can sell your loan to another person/company - XYZ Mortgage company its successors and or assigns etc... Meaning if they sell your loan, you will be obligated to pay the party it is sold to. The original creditor notifies you a sale has taken place, the new creditor notifies you that the sale has taken place, and if you send the old mortgage company a payment, they either forward it for you or they return it to you - but they do not keep the funds - as they are no longer your creditor.

In the situation of a medical account that has been placed for collections, the OC hires the CA to do a job for them, giving them x number of months to collect. If they collect on the account, they have to send payment in the amount in their contract to the OC, and they keep a portion. If do not, the OC can move the account to a new agent. This means the ownership of the debt remains with the OC.

There are some circumstances where OC will actually sell the account to another company. In this instance the CA actually buys the account for a portion of the balance due and tries to recoup their investment. This means that the ownership of the debt has been transferred - BUT the debtor had to agree to this transaction upfront - like in the case of a mortgage. Very few accounts outside of a mortgage are set up like this.

If the OC has actually sold the account - they cannot collect funds for it, as it is not due to them. They either have to return the funds to the debtor or forward them to the CA who purchased the debt. I have personally only seen this happen a handful of times - where an OC has returned a check for a collection account.

I have been working w/ one of my buyers who was in this very situation. They had a collection account (medical) that they sent a check directly to the OC. No contact - just mailed the check.

One week later, the original creditor cashed the check. 45 days later the CA still had it listed on their reports. We disputed the account as paid in full - did not give any details and told them to remove it immediately. After verifying the debt was paid, the account was removed from all three bureaus and my clients Equifax score raised 9 points.

Oh, that's good indeed :)