You might get a letter in the mail that tells you that you have been turned over to a debt collector. What does this mean? A debt collector might be a person, collection agency, or even a lawyer who is trying to collect a debt owed to someone else. They are trying to contact you because a creditor believes you are past due on the payments you owe.
Collection agencies are companies that buy past-due debts from creditors or other businesses and then try to collect them.
Medical bills are the most common collections items and show up on 43 million credit reports as unpaid, past due debts. One in five households in America have unpaid medical bills, according to the Consumer Financial Protection Bureau. In 2022, this amounted to $88 billion. And these bills commonly have errors.
Not all collections are for large amounts. A few weeks ago, Flatwater Free Press ran a story about schools in Nebraska that turned unpaid lunch bills over to collection agencies. Four Class A schools, Lincoln, Kearney, Columbus, and Scottsbluff, use debt collectors.
Lincoln Public Schools indicated the average of the 1700 debts they sent to collections was $67. Only one bill was over $200. The district got back less than a quarter of what was owed. The collection agency received 40% of the amounts they collected. Since the article, Lincoln Public Schools has stopped the practice of using agencies to collect school lunch debt.
According to Flatwater Free Press, Scottsbluff Public Schools sent about 50 debts to collections last school year and all were over $100. The district recouped 9% of the roughly $12,500 it was owed. Kearney Public Schools referred nearly 60 debts averaging $500 in the last year. The collector has gotten back less than 2% of the $29,500 owed.
hat should you do if you are contacted by a debt collector?
According to the Consumer Financial Protection Bureau, there is certain information they must give you, either in the initial communication or within five days.
• A statement that the communication is from a debt collector
• Your name and mailing information, along with the name and mailing information of the debt collector
• The name of the creditor or creditors you owe the debt to
• The account number associated with the debt (if any)
• An itemization of the current amount of the debt that reflects interest, fees, payments, and credits since a particular date
• The current amount of the debt when the notice is provided
• Information you can use to reply to the debt collector, such as if you believe the debt is not yours or if the amount is wrong
• An end date for a 30-day period when you can dispute the debt
If you don’t believe you owe the debt or believe the amount is wrong, you can ask for more information. You can dispute the bill. This must be in writing and within 30 days. If you don’t send a written letter to the debt collector, you may lose your rights.
After receiving your letter, the debt collector must pause trying to collect the debt until they’ve investigated your concern and verified that you owe the money.
Under the Fair Debt Collection Practices Act, there are certain things a debt collection agency may not do. They cannot contact you before 8:00 am or after 9:00 pm. They cannot contact you at work unless your business allows personal contacts. They may not post your debt publicly on social media. If they’ve contacted you via email, text, or private message on social media, they must explain that you can opt out of that communication method. They may not harass you. If you have an attorney, they must go through the attorney.
If you need more information, go online to the Consumer Financial Protection Bureau, consumerfinance.gov.