When an original creditor assigns an unpaid debt to a collection agency, the original creditor no longer has the right to negotiate a new payment plan, but many creditors will continue to accept your payments. Your agreement is with the original creditor and you may continue to make payments on the account to the creditor, unless it advises you in writing that it has assigned the account to an outside collection agency and instructs you to make payments to the agency.
Original Creditor
The original creditor is the lending party that initiated the loan. If you neglect to repay the loan, the original creditor may assign the account to a third-party collection agency. For the original creditor to assign or sell your account, the credit agreement that you signed must allow for the assignment. If the original creditor assigns the account to a third-party collection agency, it may continue to accept your payments, but it may still owe the collection agency its fee.
Third-Party Collection Agency
A third-party collection agency accepts debt account assignments from original creditors for the sole purpose of collecting the account. Collection agencies may add fees and interest to the outstanding amount due -- if the original contract permits -- and they may report the collection account to all three credit bureaus. The assignment agreement between the original creditor and the debt collector typically grants a percentage of the collected amount to the agency as payment for its collection activity. Once the debt is assigned, the collection agency may contact you or file a lawsuit against you for the debt in accordance with the Fair Debt Collection Practices Act (FDCPA).
Debt Buyer
If an original creditor sells the credit account to a debt buyer, the original creditor no longer owns the account and cannot accept payments. A debt buyer owns the debt outright, so any payments on the account must go to the buyer. If you're contacted by a debt buyer, check the terms of your original credit agreement to confirm that the lender had the right to assign the account before making any payments. Debt buyers must comply with FDCPA guidelines.
Credit Report
Original creditors, collection agencies and debt buyers all have the right to place a negative listing on your credit report for the same account. The original creditor will likely list the account first as delinquent, then as a charge-off. The collection agency or debt buyer typically lists the account as a collection account. Any of the listings may remain on your credit report for seven years, whether you make payments to the original creditor, the collection agency or the debt buyer.
0 comments:
Post a Comment