Q. Is it ok for the collection agency to do this?
My husband and I are trying to get out of roughly $50k worth of credit card debt. We are considering refinancing our home and using the equity to pay the debt. However, three years ago my husband moved out of his apartment in Seattle to the Midwest with me. He gave his notice to the apartment complex and paid the next two months of rent to get out of his lease. Now they are saying that he still owes them money for breaking his lease. The Collection agency wants nearly $1100 in interest on top of back rent.
What do you recommend we do? They said that if we paid it all they would delete it from his credit report or if we paid $3600 they would say it was “settled in full.”
Dealing with collection agencies can be frustrating, especially if they are trying to collect a debt that you don’t believe you owe. The first thing you should do is have the collection agency validate the debt. This means they need to send you written evidence that they own it and that you owe it. Collectors have 30 days to send it, and you can either contest it or pay it. While you wait, I suggest you contact the landlord in Seattle to get details about this debt, for all you know, it could be a misunderstanding. Also, you should gather any documentation that can prove that your husband paid two month’s rent to get out of the lease. Was there a written agreement for this deal? Any records will be crucial to contest this debt.
When you communicate with the landlord or the collection agency, insist that all communication be done in writing and via certified mail to keep accurate records of your interactions. If you talk to the collectors, make it brief to avoid giving them any information they could use against you. Keep in mind that most debt collectors can be manipulative and some even use unethical persuasion tactics to get you to pay. For instance, you mention they offered to delete the debt from your husband’s credit report if you paid it in full. Unfortunately, that’s not how it works. When you pay a debt in collection, the collection agency reports to the credit bureaus that the debt was paid in full or partially, but it will stay on your credit report for seven years. Only incorrect information can be removed permanently from a credit report. You can get free copies once every 12 months at Annualcreditreport.com.
I highly recommend you take it a step further and talk to a credit counselor from an NFCC certified member agency. Counselors can help you prepare a strategy to deal with the collection agency or determine if you should seek legal help. Not only that, they can help you with your overall goal to repay your debt. A counselor can help with this too. In fact, they can help you explore debt repayment strategies before you refinance your house to repay your debts. Refinancing your house jeopardizes your home if you can’t repay the loan, and you’ll still have to pay closing cost, which can set you back a couple thousand dollars. You have options and plenty resources available to become debt free. Talk to a counselor; you’ll be in good hands.
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.