If a debt collection company refuses full payment is the debt still valid?

Question

I was charged on a closed account for a service I never received. It is only a couple hundred dollars. I never paid it because it was not a valid debt.

I am trying to fix my credit. I called up the collection company ready to pay. They demanded I declare the debt is valid. I refused, saying the debt is not valid, that is why I didn't pay, but I'm willing to pay it off in full to fix my credit report. They refused to accept payment because I refuse to declare the debt is valid over the phone.

Is this still a valid debt or have they violated the FDCPA?

Answer 1

It sounds like THEY don't think the debt is valid and want to validate it by getting you to claim it is. It might be worth sending them a letter asking them to prove the debt is yours or remove it. This is all credit repair companies do.

If they can't find proof then they have to remove it from your report. Paying the debt after claiming it is valid is not going to fix your credit.

Also, don't trust anything they tell you about whether it will be removed from your credit unless they provide it in writing. They WILL lie to you.

Answer 2

Transferring money to someone doesn't in itself make it their money. For that, a legal act needs to happen at the same time. This can either be payment to discharge an obligation, or gifting the money. We rarely pay attention to this, because it is generally clearly implied by the context what is happening.

If you simultaneously claim that you do not owe them anything, and transfer $200 to them, it is unclear what this is supposed to mean. If you have no obligation, it can't be to discharge the obligation. It doesn't make sense for it to be a gift either. You could intend to sue them later to get the money back.

What you want to do is to set up a contract with them specifying that they will forgive that debt if you should indeed owe it and (importantly) will remove any negative entry in your credit report; while you will pay them some amount of money (this amount could probably be less $200). Now when you transfer the money, it is to discharge the obligation from this contract.

Answer 3

This is a bit of elaboration for Arno's reply, which sketches the solution but leaves out some detail (to my mind).

As Arno says, you can't settle a debt if you simultaneously claim you don't have a debt in the first place.

But equally, they can't demand money from you without proof its your debt, either.

So the solution is that you state to them, in roughly these terms:

Dear Sirs,

I note your letter of DATE claiming a debt of $AMOUNT for ITEM.

I will be glad to settle the debt, upon proof it is in fact mine to settle, and the debt is validly claimed against me.

In particular, please note my objection that the debt is not valid, because the service billed for was never provided to me, because the account had been closed before that time, and/or was provided against my instructions.

Please therefore provide proof and confirmation, not just that the debt is charged and sent to you for collection (which I accept is the case), but also that your principal is willing to testify in court on pain of perjury that the service was validly provided to me, before my account with them was closed, and is in fact a payment due for a service validly provided.

Alternatively, if the debt is not provably mine to settle, and/or cannot be proved valid to charge against me, I look forward to your confirmation that it will be removed from my records and the matter closed.

If you have a different or preferred way to resolve this, please let me know, since at present I am simply lacking any evidence that allows me to sign a legal document agreeing this is a valid debt, for reasons given. Such a declaration would appear to be perjury right now, and a false statement, hence the problem. Please therefore contact your principal and seek further directions before replying. [It is also possible that if you do not, then any consequential costs, expenses or other amounts may be recoverable from you. - check this sentence is correct for your area before including it]

I await details of proof of debt, and to settling this matter upon valid proof.

Answer 4

That was a strategic play on their part.

Their demand to "admit the debt" wasn't vanity, but a very wise legal strategy. If you admit the debt is valid, that restarts the clock on the statute of limitations. This greatly increases the cash value of the debt in the used-debt market. Huge win for them even if you don't promptly pay. Now they can sue you!

So this collector was brilliant. 90% chance you would have thought "what difference does it make since I'm about to pay it anyway?"

98% of the time when you try to engage with a collector via telephone, they will whip you. These are professional manipulators, trained to put you at the worst possible disadvantage in the law. Case in point.

Paying DOES NOT fix your credit!

I bet they implied that it would, but did not say it.

You suffer from a common misconception there. You think that a credit report is an "extortion" to force you to pay old debt. Not at all, and that would be kind of appalling, actually.

The credit report is an accurate record of how reliable you are for paying debt. You did not pay this for years, and that is a fact.

You almost changed that report to "did not pay for several years, and then finally paid". And since you would have acknowledged the debt (by paying it), that would have also restarted the clock on that credit mark. So it would be on your credit 7 years more.

Yes. Paying off old debt makes things worse.

Hey, I didn't design the system. I think it's a stupid system full of perverse incentives, that does not conform in any way to core human values of "be honest", "be fair" and "keep your word".

Since they have built this sick system and they game the system (in pursuit of filthy lucre above all), you too must game the system to get what is fair.

You must "make an offer they can't refuse".

It must be a written contract. The deal is "you pay, they remove the mark".

But, watch who your counterparties are. If you agree with the collection agency that they won't mar your credit, you don't have an agreement with the original creditor, who could continue to mar your credit. So you need to find out who actually holds your debt.

Anyway, the bones of an agreement are as follows:

• Whereas there is a bill (identifying info enough to identify it, but no more) and saying HIPAA does not apply to this contract. That's throwing them a bone if it's medical related.

• Whereas all of you recognize that there is a genuine disagreement as to the validity of the debt.

• Whereas all of you desire a quick, final and no-fault resolution.

• Therefore......

• You all agree you pay $X to fully settle the matter. Paid in 30 days or entire agreement is void, but, statute of limitations restarts.*

• Any payment whose purpose is unclear applies to this first.

• This is the final resolution.

• No-fault. Parties agree this settles matter in good faith. Settlement is for practical reasons, is not established as a valid debt, and any difference between amounts is not a canceled nor forgiven debt. **

• Parites agree not to defame or disparage the other in any way, including and particularly that no adverse statements will be made to credit reporting agencies, and past statements disavowed.

• Jurisdiction of law.

• Severable.

• Inseparable.

• Counterparts.

You can do this as DIY legal, but it might be worth the time of a contract lawyer to get it right.

* Never miss an opportunity to "throw them a bone" (or some raw meat in this case) if it doesn't put you at disadvantage. Since you will pay, it is moot.

** This prevents an IRS problem: When debt is forgiven (owed $1000, pay $400) the forgiven ($600) is considered taxable income for you, and they can send a 1099 to the IRS and the IRS will want tax. By this agreement, they can't. That would be tax fraud if the debt was genuinely valid.