Q&A: The payments aren’t late, but the debt collectors are calling. What does it mean?

Dear Liz: In the last few months, I have received collection calls and emails for payment, sometimes before I even got the invoice and in every case before payment was due. For example, on Sept. 25 I was emailed for the second time for payment on an invoice with an Oct. 17 due date. Some but not all of these communications relate to medical bills. Is this legal?

Answer: Probably. Most companies wait until a bill is seriously overdue before turning it over to collections. Some hire collection agencies much sooner, however, and a few — including some medical providers — turn over their whole accounts receivable process. That means the collectors are responsible for regular billing, not just debt collection.

It’s unpleasant to hear from collectors, especially on an account that isn’t overdue, but you’re not likely to face credit score damage as long as the bill gets paid on time. Even if it’s past due, there is now a 180-day waiting period before unpaid medical debts can show up on people’s credit reports. (The clock starts on the bill’s first due date.)

Collectors may justify their “outreach” calls and emails by saying many people are confused by medical billing and put off paying because they think insurance will take care of the bill. That doesn’t make such contacts less annoying for those who pay on time.

Consider letting the medical providers and other companies know that you don’t approve of these tactics. Some may care enough about customer service to change their billing approach, or require the collection company to stop the premature contacts.

Wednesday’s need-to-know money news

Today’s top story: 3 questions to answer before taking out student loans. Also in the news: Debt collection goes high-tech, 7 alternative ways to pay your taxes, and credit card rental insurance doesn’t cover as much as you think.

3 Questions to Answer Before Taking Out Student Loans
Important things to consider.

From Stone Age to Drone Age: Debt Collection Goes High-Tech
Send in the drones!

7 Alternative Ways to Pay Your Taxes
Thinking outside the box.

Credit Card Car Rental Insurance Doesn’t Cover as Much as You Think
Reading the fine print.

Q&A: Cleaning up your credit score

Dear Liz: I have several small dings on my credit. I’m now in the position to pay them off, but how do I know my credit will be improved? Should I call the companies and ask if they will remove it if I pay in full and get it in writing?

Answer: Paying off collections won’t help your credit scores, and creditors rarely agree to delete collection accounts in exchange for payment. You can always ask, but don’t count on this as a way to improve your credit. The best way to recover from “small dings” is to use credit responsibly in the future. That means paying bills on time and using less than 30% of your available credit on your cards. You don’t need to carry balances to improve your credit.

Thursday’s need-to-know money news

Credit report with score on a desk

Credit report with score on a desk

Today’s top story: Debt collectors continue to defy requests to stop calling. Also in the news: How to map out a year’s worth of shopping, how stuck-in-the-middle parents can afford college, and why your free credit score might not be what you think it is.

3 in 4 Say Debt Collectors Defy Requests to Stop Calling
Consumers are still feeling threatened.

Map Out a Year’s Worth of Shopping Right Now
When to get the best deals.

How Stuck-in-the-Middle Parents Can Afford College
Looking at the options.

Your Free Credit Score Might Not Be What You Think It Is
Understanding the differences.

Q&A: Will paying off collections help credit scores?

Dear Liz: I have a question about clearing up collections on my credit reports. I used a credit repair company that did help me with most of the setbacks on my credit reports, but I still had collections that were recent and my scores were going up and down. The credit repair company left me to deal with the collections. Will it hurt my scores if I pay them off, and is there a way to get them off my report for good?

Answer: Paying off the collections shouldn’t hurt your scores, but probably won’t help them either. You can try to negotiate with the collection agency to stop reporting the collection accounts in return for payment, something known as “pay for delete” or “pay for deletion,” but debt experts say few agencies will agree to do that.

Plus paying off collections is more complicated than it may seem. Many agencies pay pennies on the dollar for collection accounts, which means virtually anything you pay them is pure profit. That means you should be able to negotiate a significant discount of 50% or more if you can pay in full.

However, not all collectors are ethical. Some pretend to own debts they actually don’t, so any payment to them is money down the drain. Other agencies will re-sell any debt you don’t pay in full to another collection agency, which means more collection calls.

Before you attempt to settle any collection account, visit DebtCollectionAnswers.com and download the free e-book written by consumer advocates Gerri Detweiler and Mary Reed.

Tuesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to save for college without sacrificing retirement. Also in the news: Recovering from a poor credit history, 3 ways to pay off a debt in collections, and the best savings strategies for your personality type.

How to Save for College Without Sacrificing Retirement
It’s possible to do both.

Poor Credit History? There Are Ways to Recover
Making a comeback.

3 Ways to Pay Off a Debt in Collections
Getting debt collectors off your back.

Here Are the Best Savings Strategies for Your Personality Type
Are you the gambling type? Or a goal-setter?

Tuesday’s need-to-know money news

Life InsuranceToday’s top story: Life insurance questions you’re too embarrassed to ask. Also in the news: what to do with an IRA when you leave a job, when a debt collector calls to collect money you don’t owe, and the profitable business of lending to subprime borrowers.

5 Life Insurance Questions You’re Too Embarrassed to Ask
There are no dumb questions!

Why to Do an IRA Rollover When You Leave Your Job
Don’t leave money behind.

When a Collector Calls About a Debt You (Possibly) Don’t Owe
Get all the information you possibly can.

The profitable business of lending to subprime borrowers
Subprime borrowers bring in lots of extra money.

Wednesday’s need-to-know money news

money-vacation-saveToday’s top story: Overcoming the obstacles between you and retirement. Also in the news: What the President wants to tell college students, what happens when your debt goes to collections, and how to pay less for staying cool this summer.

5 Obstacles Between You and Retirement (and How to Overcome Them)
Clearing the pathway to a solid retirement.

5 Things the President Wants to Tell College Students
Messages for students and student loan borrowers.

What Happens When Your Debt Goes to a Collector?
Not every debt collection process is the same.

Stay cool, but pay less for electricity this summer
Your wallet’s hot enough.

Can You Be Arrested for Debt?

handcuffgavel_istockphoto_thinkstock_12Owing money isn’t supposed to be a crime.

So why are people being arrested over delinquent student loans and other debts?

The official line for why U.S. Marshals confronted Houston resident Paul Aker earlier this month is that he failed to appear in court over a $1,500 student loan taken out three decades earlier — not that he owed the money. But that’s a distinction without a difference for many Americans who get caught in the gears of the highly profitable debt-collection industry.

In my latest for NerdWallet, find out how private law firms are convincing courts to turn civil cases into criminal ones.

Q&A: Getting rid of robocalls

Dear Liz: We’re getting daily robocalls from collection agencies attempting to collect debts from people with names similar to our own. Generally we ignore the calls on the advice of a friend whose mother died heavily in debt and who said nothing can be gained from a conversation with Repo Man. Is that good advice?

Answer: Ignoring debt collectors isn’t always the best advice — but in this case, it is. Using autodialers and pre-recorded messages is a hallmark of scammers hoping to scare people into paying debts that aren’t theirs.

If you’re not already signed up with the federal Do Not Call Registry at www.donotcall.gov, then do so. If you are on the list, file a complaint at that site. You also can make a complaint at the Consumer Financial Protection Bureau at www.consumerfinance.gov/complaint.

Another good option is signing up for a free service such as NoMoRobo, which detects many scam calls at the first ring and hangs up on them.