Should You Pay a Debt Collection Agency?

If you’ve had a debt go to collections before, you likely know all about the process. For those who are less sure, however, it can be good to have a firm understanding of what it means to deal with debt collectors before figuring out how you should approach them.

If you have debt and don’t repay it, the lender is going to make a few attempts to get their money from you. After a while, though, they’re going to give up on this and pursue another option: selling the debt to collectors.

Debt collections agencies purchase debt at a discount from lenders who don’t want to deal with it any longer. Those collectors will then use more aggressive tactics to attempt to reclaim the amount they believe they’re owed in order to turn a profit. Debt collections really only applies to unsecured debts where there’s not a linked asset to repossess. Credit card debt is really the bread and butter of many collections agencies.

If you have an unsecured debt you haven’t repaid, don’t be surprised when an unfamiliar company calls saying you now owe them the money. These are probably the debt collectors who bought your debt from the original lenders. But here’s the million-dollar question: Should you pay a debt collection agency?

Have the Debt Validated

Before you do anything, even if you think the debt is yours and you do in fact owe it, ask the debt collectors to validate the debt. A few things will happen with this. If it’s done within 30 days of you being contacted by the collectors, they will have to stop asking you to pay until they’ve verified the debt is actually yours.

Beyond this, however, asking for debt validation is a way for many consumers to save themselves from debt collection. It’s not uncommon for records to get shuffled up when being sent from the original lender to the collector. It’s possible they won’t be able to locate any documentation that proves you actually owe the money—meaning you’re off the hook.

Furthermore, there are plenty of times where collectors think someone owes them, but they in fact have incorrect information. If believe you’ve already paid off a debt, or don’t owe it at all, validation can protect you from having to be responsible for a loan that isn’t yours.

Know the Laws Affecting You

There are many rules and regulations that determine what’s fair practice for debt collections. Some of these also set statutes of limitations for how much time must pass before a debt can no longer be called in for collection.

If you’re dealing with debt collectors, familiarize yourself with the Fair Debt Collection Practices Act (FDCPA). This is a federal law that sets limitations for what actions are acceptable for debt collection agencies. There are also many state laws related to debt collection practices. These are generally going to be the ones that determine statues of limitations; so be sure to look at them before paying debt collectors.

If You Really Owe the Debt, Decide How to Proceed

If the debt is really yours and the collection agency can prove it, you’re going to have to end up paying it one way or another. Aggressive collections agencies will file lawsuits fairly quickly in order to move things along for themselves. Negotiating a repayment plan with the collectors is often the best course of action. If you do nothing, it can lead to outcomes such as wage garnishment or even judgements against your other property.

While there are some ways to get out of paying debt collectors, it’s much more difficult if you truly owe the money. It’s worth exhausting your options before paying debt collectors, but understand that doing nothing at all likely won’t work in your favor.