Debt collectors can be quite intimidating. You might start receiving calls demanding immediate payment for an old debt – one you may not even remember or recognize. They insist you owe the money and pressure you to pay right away.
Many people simply pay to stop the relentless calls. However, before you give in, there are crucial reasons why you should seriously reconsider paying a collection agency without doing your homework first.
1. Paying Can Revive a Dead Debt: The Statute of Limitations
When it comes to debt, there’s a legal time limit on how long a debt collector can sue you to recover what you owe. This is known as the statute of limitations, and it varies depending on your state. For instance, in Mississippi, the statute of limitations for credit card debt is 3 years.
Once this period expires, the debt collector loses the legal right to sue you for the debt. However, making a payment, or even acknowledging the debt and promising to pay, can restart this clock. This means the debt can become legally enforceable again for another statutory period, potentially years.
Therefore, if your debt is nearing the statute of limitations expiration, don’t inadvertently give the collection agency more time by making a payment. Waiting it out could mean the debt becomes legally unenforceable, and you can no longer be sued.
2. Always Demand Debt Validation: Make Them Prove It
The Fair Debt Collection Practices Act (FDCPA) grants you the right to request debt validation from any collection agency. This crucial right requires them to provide documented proof that you actually owe the debt they claim. Surprisingly, collection agencies often lack this necessary proof, especially for older debts they’ve purchased for very little.
These agencies often buy portfolios of old debts for pennies on the dollar, and they may have very limited information about the original debt. They are betting that you will simply pay without question.
Far too many consumers end up paying debts they don’t actually owe because they fail to exercise their right to debt validation. Don’t let this happen to you. Always demand written proof of the debt before you pay a single penny. If they cannot validate the debt, you are not legally obligated to pay it.
3. Paying Might Not Improve Your Credit Score – It Could Even Hurt It
Many people mistakenly believe that paying off a collection account will automatically boost their credit score. Unfortunately, it’s not always that simple. Paying an old collection debt can sometimes even temporarily lower your credit score.
This counterintuitive effect happens because paying the debt can “re-age” the account, making it appear more recent on your credit report. This recency can negatively impact your score in the short term.
Even after you pay the collection, the negative record of “paid collection” will remain on your credit report and can continue to harm your score for years. Paying the debt might stop the collection calls, but it doesn’t erase the negative mark on your credit history. Don’t pay a collection agency solely to improve your credit score without understanding the potential consequences first.
4. You Have Leverage: Negotiate a Lower Settlement
Collection agencies purchase defaulted debts for incredibly low prices, often just pennies on the dollar – sometimes as little as a few cents for every dollar of debt. This huge discount gives them significant room to negotiate and accept a settlement for much less than the original amount you owed. However, they will almost always start by demanding the full balance, hoping you’ll pay it without question.
Don’t let them take advantage of you. Call their bluff and propose a lower settlement offer. Many collection agencies are willing to accept a reduced amount just to get something rather than nothing. Always ensure you get any negotiated payment plans or lump-sum settlements in writing before you send any money. This written agreement protects you and confirms the terms of your settlement.
5. Payment Doesn’t Guarantee Credit Report Updates
Even after you diligently pay off a collection account, there’s no guarantee the collection agency will properly update your credit report. The negative “unpaid collection” status could remain on your report incorrectly, continuing to damage your credit score indefinitely. Unfortunately, this happens more frequently than you might expect.
Before making any payment, get written confirmation from the collection agency that they will, in fact, mark the debt as “paid” on your credit report with all credit bureaus. Don’t assume they will do it automatically, and don’t risk making a payment if they won’t commit to updating your credit report in writing.
Don’t Rush to Pay – Understand Your Rights and Options
Debt collectors often rely on pressuring consumers into hasty payments based on fear and a lack of information. It is essential to take a breath, slow down, and fully understand all your options before making any decisions. Paying debts in collections isn’t always the best solution and can sometimes create more problems in the long run.
Educate yourself before you pay. Consider consulting with an attorney who specializes in consumer protection law. They can offer expert advice tailored to your specific situation. Paying may ultimately be the right course of action, but ensure you understand why you are paying and what you are accomplishing before you hand over any money.
Get Expert Legal Help Navigating Debt Collectors
Debt collectors thrive on consumers reacting impulsively out of fear and misinformation. Don’t fall into this trap. Become an informed consumer who explores all available options before deciding whether and how to handle debt collections. Protect yourself by asserting your rights under consumer protection laws, both at the state and federal levels.
If you need someone on your side to advocate for you, reach out to Ware Law Firm. Their experienced team is dedicated to guiding Mississippi residents through complex consumer protection issues. They offer free case reviews to discuss your situation and advise you on the most strategic next steps. Take control of your financial situation with legal expertise supporting you.
Author Bio
Daniel Ware is the CEO and Managing Partner of Ware Law Firm, a consumer protection law firm located in Magee, MS. With over 25 years of legal experience, he passionately advocates for clients in various consumer law matters, including identity theft, lemon law, debt collection, and other consumer protection issues.
Daniel earned his Juris Doctor from the University of Mississippi School of Law and is an active member of the Mississippi Trial Lawyers Association. He has received numerous accolades for his legal work, including being recognized among The National Top 100 Trial Lawyers.
