1. The misguided belief that doing so will improve their credit scores (it doesn't).
2. Fear of a lawsuit.
Paying collection agencies is always, always a gamble. Most people don't have the lump sum the company demands just lying around and must pay off the debt bit by bit. The problem here is that when you submit a payment, you restart the statute of limitations for lawsuits
|You'll need a stack of cash for lump sum payments|
Note: Don't get the statute of limitations mixed up with the reporting period of a collection agency's tradeline on your credit report. They are two entirely different things.
The Ideal Scenario: When the Collection Agency Doesn't Sue
The ideal situation is for the collection agency to seemingly forget about you and for the statute of limitations to pass. Granted, some particularly shady companies will file lawsuits beyond the statute of limitations. Should that occur, its up to you to notify the court that the lawsuit is out-of-statute. In general, however, once the statute of limitations passes, you're pretty much home free.
But if you make any payments on the debt, you extend the statute of limitations. That means that, should you fall into financial trouble and be unable to make your payment one month, you're even more likely to get slapped with a court summons – because the collection agency knows you have the money and they want it.
It's up to you whether you want to keep your fingers crossed and try to wait out the statute of limitations or pay off the debt bit by bit and hope you don't fall on hard times.
Factors That Increase Your Odds of Being Sued By a Collection Agency
Not all collection agencies sue debtors. Some do, some don't. Of those that do, there is often little rational sense behind these lawsuits. For example, I've seen one particular collection agency (Not naming any names here, but its initials are MCM) sue a debtor over a few hundred dollars while completely ignoring a second debtor who owed thousands. As a rule, however, the following factors increase your odds of being sued by collectors.