A collection agency has my debt. Should I pay the debt collector or the original creditor?
By Kathleen Michon, Attorney · Northwestern University School of Law
Updated by Amy Loftsgordon, Attorney · University of Denver Sturm College of Law
If you have an overdue debt sent to collections, you might still be able to negotiate repayment directly with the creditor. In fact, if you're ready to negotiate on a debt, you'll probably be better off talking to and paying the creditor, not a collection agency. Here's why.
Is It Better to Pay the Original Creditor or the Debt Collector?
Generally, paying the original creditor rather than a debt collector is better. The creditor has more discretion and flexibility in negotiating payment terms with you. And because that company might see you as a former and possibly future customer, it might be more willing to offer you a deal.
Depending on your circ*mstances, the creditor might let you make a lump-sum payment or a monthly payment arrangement. However, whether you can work with the original creditor depends on whether the creditor assigned the debt to a collector or sold it to them.
If the creditor sold the debt to a collection agency, you can't negotiate or pay the original creditor. Because the original creditor no longer owns the debt, paying that company wouldn't satisfy the debt you now owe the collector.
How Do Debt Collection Agencies Work?
Debt collectors are third-party organizations that often buy delinquent debt from creditors and try to collect on them. Or, sometimes, the creditor assigns the debt to a collection agency, and the agency tries to collect on behalf of the creditor. With an assigned debt, the collector generally keeps a percentage of the amount it collects and gives the rest to the creditor. If it purchases the debt, the collection agency keeps the full amount.
After the creditor assigns your debt to a debt collector or the agency buys the debt, the creditor gives up on trying to recover the debt. Then, the collection agency will probably contact you pretty quickly. Debt collection agencies know that the quicker (and more often) they contact you, the more likely they will get you to pay up.
So, you might get calls or angry texts from a pushy debt collector who isn't too concerned about violating the federal Fair Debt Collection Practices Act or any applicable state law. They're mostly just concerned about separating you from your money.
How Do You Find Out If Your Debt Has Been Sent to Collections?
The easiest way to determine if your debt has been sent to collections is to review your credit reports. Once a debt is sent to a collection agency, the debt is reported as a separate account (tradeline) on your credit reports.
You can get copies of your credit reports from the three major credit reporting bureaus (Equifax, Experian, and TransUnion) from the Annual Credit Report Service at www.annualcreditreport.com. You can get free weekly reports online, a service the credit reporting bureaus started during the COVID-19 pandemic and have decided to make permanent.
Can You Pay Your Original Creditor Instead of a Debt Collection Agency?
Again, you can negotiate with the original creditor if the debt was assigned to the collection agency, not sold to the collector. To pay your original creditor and negotiate directly with that creditor rather than a debt collection agency, ask the collection agency for the phone number of the original creditor's collections department. Then, call the creditor and ask if you can pay the debt with the creditor.
Ideally, the creditor will immediately agree to accept payment from you, and you'll work something out. Unfortunately, that doesn't always happen. The creditor might agree to work with you only if you first deal with the collection agency, establish a repayment plan, and make two or three payments under the plan.
If you stick to the deal, the creditor might even eventually give you a new line of credit, helping you rebuild your credit.
Can You Negotiate With the Original Creditor If Your Debt Is in Collections?
If the creditor agrees to negotiate with you, make sure it owns the debt. If the collection agency bought the debt from the creditor (rather than the creditor just assigning the debt to the agency for collection), the agency owns the debt. If you negotiate with and make payments to the creditor, the collector may refuse to credit you for those payments.
But even if the original creditor still owns the debt, it doesn't have to negotiate with you. If you want to negotiate with the original creditor rather than a collector, it's best to contact them as quickly as possible after the debt goes to collection.
How to Negotiate With the Original Creditor
If you have money available, you could offer a lump-sum settlement. Creditors are often willing to settle a debt for less than they're owed if it means getting a decent amount of cash soon. Or you could try to work out a payment plan. These are the same options available if you negotiated with the collector, although the creditor might be more flexible and willing to compromise.
Creditors are typically less willing to accept a repayment plan over a lump-sum settlement because they know you might default on payments again in the future. Be sure to get any agreement involving repayment in writing.
Negotiating Credit Improvements
Creditors can report delinquencies to the credit reporting bureaus for up to seven years from the due date for the last scheduled payment before the delinquency occurred. An account sent to a collection agency can be reported for seven years and 180 days from the date of the delinquency that led the account to collections. (15 U.S.C. § 1681c).
If you negotiate a settlement, you can ask to have negative information about the debt removed from your credit files or shown as payment in full if you make the payments under the new agreement. The creditor might not agree, but it doesn't hurt to ask.
Get Your Repayment Agreement in Writing
Again, get any agreement you reach with the creditor in writing—preferably, in a document the creditor provides to you. However, a letter from you to the creditor confirming the agreement is better than nothing.
Part of the written agreement should be an acknowledgment by the creditor that it owns the debt.
Talk to a Lawyer
If you need help dealing with a creditor or debt collector or would prefer someone else handle your debt negotiations, consider talking to a debt settlement lawyer.
