Can I Pay the Original Creditor Instead of the Collection Agency?

Getting calls from a collection agency is stressful. You may want to resolve the debt by paying the original creditor instead. But is this possible and advisable? Here’s what you need to know about paying original creditors versus collection agencies.

What Happens When a Debt Goes to Collections?

When you fall behind on repaying a debt like a credit card or medical bill, the original creditor may eventually give up on collecting from you directly They will “charge off” your account and sell or assign the debt to a collection agency

The collection agency buys your debt from the original creditor for pennies on the dollar They make money by collecting as much as possible from you.

Legally, the original creditor transfers the right to collect your debt to the agency. You now owe the collection agency instead of the original creditor.

Why Paying the Original Creditor Can Backfire

It makes sense to want to avoid the collection agency and pay your original debtor directly. But doing this can backfire:

• You may still owe the debt collector. Because your original creditor sold or assigned the debt, you are legally obligated to pay the collection agency. If you pay the original creditor, the agency may still come after you for the amount owed.

• The original creditor may keep your payment. Since they no longer own the debt, the original creditor is not required to forward your payment to the collection agency. You end up paying twice.

• It can hurt your credit. The collection agency can continue reporting the unpaid debt to credit bureaus. This damages your credit score.

• You lose leverage. Collectors often agree to settle debts for less than the full amount. But if you pay the original creditor first, you lose negotiation leverage with the agency.

How to Pay the Original Creditor

Despite the risks, repaying your original creditor directly is possible in certain situations:

• The debt is with the creditor’s internal collections department. If the creditor still owns the debt and is attempting to collect in-house, you can work out a repayment plan directly with them.

• You’ve started repaying the collector If you’ve already worked out a payment plan with the agency and begun making payments, the original creditor may be willing to take the debt back. But there are no guarantees

• You negotiate a deal upfront. Get written confirmation from both the creditor and collection agency that the creditor will recall the debt before making payments only to the original creditor.

Even in these cases, the creditor is not obligated to work with you directly. Tread carefully.

Tips for Bypassing Debt Collectors

Here are some things you can do to avoid going through collections and pay back your original creditor:

• Act quickly to contact the creditor as soon as you miss a payment on a debt. Waiting too long reduces your options.

• Explain your situation and ability to repay honestly. Negotiate a reasonable payment plan.

• Get agreements in writing to protect yourself legally and financially.

• Consider credit counseling to mediate and consolidate debts if the above strategies fail.

• Prioritize high-interest debts if working with limited funds.

• Keep communicating with creditors and collectors at all stages. Silence can make matters worse.

• Know your rights under consumer protection laws like the Fair Debt Collection Practices Act. Seek legal assistance if you need it.

The Bottom Line

When a debt goes to collections, it’s risky to only pay back the person who first owed you money. The best thing to do is to make a deal with the creditor and collector right away. If that doesn’t work, you may have to deal with the collector directly. When dealing with debts that have been sent to collections, be careful and know your rights.