Disputing Collections 101
Wilson Cole | January 23, 2023
A variety of data about your credit management information can be found in your credit reports.
Your credit scores, which are a significant factor in the risk management decisions made by lenders, are based on the loans, credit cards, bankruptcies, collection accounts, credit inquiries, and other information that frequently appears on credit reports.
All the information on your credit report must be accurate because it will influence how lenders view your credit management practices when you apply for a future loan or credit card.
If you think any account information is wrong, you should raise a dispute so that it can be changed or removed. You can dispute and have items deleted from your credit reports if, for instance, you have one or more collections listed there that you know are not your debts.
However, disputing them won't affect your credit report if they are due to missing payments on accounts you own. Why? How? Let's take a look at it below.
But first
You usually have to promise to make prompt payments on your account when you take out a loan, credit card, or any other type of credit.
Your account may eventually go past due and—if you miss enough payments—fall into default if you don't make your payments on time.
The creditor may send your debt to a third-party debt collector or collection agency if you miss payments on a credit account, an apartment lease, or another sort of service.
These businesses make an effort to recover debt from customers whose accounts have fallen into default with their primary creditors. Collection agencies are permitted to share information about your collection accounts with Experian, Equifax, and TransUnion, the three major national credit reporting agencies.
It is absolutely lawful for the debt collector to contact you by phone or letter and request money from you to settle the debt. The debt collector will keep a portion of the money you send them as their fee and give the balance back to the original creditor after they receive your payment.
Your credit reports will be updated once your collection has been paid off to reflect the new zero balance and to show that the account has been paid.
Similar to the majority of negative credit report items, collection accounts can be on your credit reports for up to seven years after the date that your account first started to lapse with the original creditor. So even while more recent credit scoring algorithms ignore paid-off collections, collections can lower your credit scores.
When should you be disputing collections
You should register a dispute to have any collection accounts that appear on your credit report that you don't think belong to you deleted. You usually obtain your credit reports to begin the very easy process of filing a dispute.
Collections are typically contested by the debtor because they feel they are inaccurate for a variety of reasons. You can submit a dispute, for instance, if you study a copy of your credit report and discover a collection account that you think belongs to someone else, has an inaccurate balance, or is older than seven years.
The process of disputing collections
You can get in touch with the credit reporting agency that is disclosing the collection if you find what you think to be erroneous information about the collection account.
You might also file a complaint with the collecting agency directly by getting in touch with them. Because you are directly addressing the source of the purportedly inaccurate information, this is formally referred to as a "direct" dispute.
The collection agency must either remove the collection account from all of your credit reports or rectify any inaccurate information if they determine after conducting their investigation that the collection account is, in fact, being reported wrongly.
Keep a close watch on your credit reports in this situation to make sure the business got the account closed.
In their pursuit of payment, debt collectors draw on a variety of information sources. Therefore, the customer must be systematic and comprehensive if they want to contest their claims effectively.
So what do you do?
- If anybody calls, texts, emails, or otherwise contacts you, do not discuss the debt with them. The incorrect words you use can work against you.
- Obtain the collector's contact information, including name, address, and phone number. Scammers frequently pose as collectors in order to obtain information.
- You are legally entitled to information about the purported debt, including the amount, the person who is currently responsible for it, and the contact details for the original creditor, during the initial phone call or within five days. If it doesn't arrive in five days, record that.
- Request your credit report from the three major reporting agencies right away (Experian, Equifax, TransUnion). The Fair Credit Reporting Act (FCRA) requires credit bureaus to give you information about your file and credit score.
- Look over each report to look for mistakes.
- Fill out a form to challenge a credit bureau.
- Highlight any inaccuracies on your credit report and print it.
- File your complaint with the credit bureau online or by certified letter (return receipt requested).
By doing these things, you'll start the process of getting rid of the false accusation made against you. But more needs to be done and that’s filing a debt dispute letter.
Your best option is to file a debt dispute letter to the collection agency asking that the debt be verified if you have any doubts about whether you owe a debt or that the amount owed is accurate.
According to a letter of disagreement, the collection agency must prove that you are responsible for the debt and that it can give specific details and papers to support the amount owing.
According to federal law, consumers have 30 days to submit a debt dispute letter after obtaining written notice of the debt.
However, this has been made more straightforward for you by the 2021 Consumer Finance Protection Bureau Debt Collection Rule, which mandates that all debt collectors supply you with a tear-off form so you can use it to challenge the debt rather than send a letter.
If you choose to dispute a debt in writing rather than using the tear-off form, your personal information, proof of the amount owed, the name of the creditor who is holding the debt, and a request that the debt not be reported to credit reporting agencies until the issue is resolved—or that it be taken off the report, if it has already been—should all be included.
The credit reporting agencies should get a second dispute letter with the same details so they are informed as well that the debt is under dispute.
The debt collector will assume the debt is valid if you don't challenge it within 30 days.
To Wrap It Up
There's nothing wrong with having a debt, but what is wrong is owing and not paying. That's the time your creditor taps a debt collection agency to go after you and recover your outstanding balance.
Now, debt collection is legal, yes. But when in doubt of the other party's claim, always remember you have the right to start questioning and disputing collections.
Wilson Cole is the founder and CEO of Adams, Evens & Ross, the nations largest credit and collection agency design exclusively for the staffing and recruiting industry. In 2008 he was inducted into INC Magazines, "INC 500" for being the CEO of Adams, Evens & Ross, the 307th fastest growing privately held company in America. This exclusive group of other INC 500 CEOs includes Bill Gates of Microsoft and Larry Ellison of Oracle.In 2007 Recruiting & Staffing Solutions Magazine's Editorial Staff named him " The Billion Dollar Man" due to the fact that he had collected or helped his clients collect more than 1 Billion dollars in past due debt over his career of almost 20 years as CEO of Adams, Evens & Ross.