Q&A: Collection Agency Sent Bills to Wrong Address

Hi Lee,

My name is Melissa and I came across your page form a google search. I am hoping you might be able to provide some guidance. 

In April, I received an email notifying me that there was a change to my credit report. There was a debt from 2010 (an ambulance ride to the ER) that was added. After some digging, turns out the account was sold in July 2010 to the collections agency. The agency is telling me they never received it until March 2011. Initial bills were sent to an address I haven't lived at in years, also had two other addresses on file, places I never lived, nor know anyone that lived or lives there. I have since began the dispute process. 

I am getting statements printed out from my bank from that time to see if there were any payments made to make sure this is in fact an unpaid debt. 

My question: Am I responsible after all this time? This is clearly an error on their part. At the time, I asked the hospital representative if all bills were set up on a payment plan and she verified that they were and I made monthly payments. If this was left off, why did it take 4 years for it to come to my attention? I live in NJ, however I am in the process of moving to NYC. The bill is for something that happened in Florida.

Any insight, recommendations or information would be greatly appreciated. Thank you!

--
Melissa 

Melissa,

The statute of limitations (which is the amount of time a creditor or debt collector can sue you for a debt) differs by state. In Florida, the statute of limitations is four years. In New Jersey and New York, its six years.

If you lived in Florida until July of 2014, the statute of limitations would expire and you would be free to move to another state without fear of getting sued--even if the new state's statute of limitations is much longer than Florida's.

The problem that arises here is that, if you move before the statute of limitations expires, the SOL is "tolled" in your original state of residence. That means that, as soon as the collection agency discovers that you are no longer living there, the clock on the statute of limitations just stops ticking. When and if you move back, the statute of limitations goes back into effect and begins to time out from where it left off when it was tolled.

If the collection agency was not aware that you moved out of Florida until now (and you didn't give them the date that you moved when you spoke with them) its very possible that the statute of limitations was never tolled and simply timed out on its own. That would mean you're safe no matter which state you move to. If the addresses the collection agency was sending letters to were in Florida and you didn't disclose your new address until after July 2014, you should be safe from a lawsuit.

If, however, the collection agency is aware of the fact that you moved, they can generally opt to go by the SOL in your current state. This is advantageous to the collector, since they'd have until July of 2016 to collect the debt. Now, this part is important, so listen well:

The date that the collection agency originally received the debt is irrelevant. The only date that matters is the date you made your last payment (or, if you never made any payments, the date that your payment was originally due). It makes no difference whatsoever that the collector didn't get its hands on the account until 2011. The SOL and the credit reporting period are calculated using the dates from the original account.

 If a collection agency could use its own dates to determine the statute of limitations and the credit reporting period, no one would ever be free from collection lawsuits and bad debts would hang around on your credit report indefinitely. So don't worry about the date they bought the debt or first reported the debt. It just doesn't matter.

You mention that you are contacting your bank to determine if you made any payments on the debt. Normally making a payment on the debt restarts the statute of limitations from scratch. In Florida, however, you have to provide the creditor with a written promise to pay in order to restart the clock (Just for reference, the same is true in New York). So unless you promised to pay the debt in writing, the SOL was never interrupted and may have timed out in Florida.

The statute of limitations and the credit reporting period are two entirely different things. The credit reporting period begins 180 days after your last payment and lasts for seven years. As I stated above, the date the collection agency bought the debt or originally reported the debt doesn't matter. They have to remove it after the credit reporting period expires. The credit reporting period is the same no matter which state you live in.

Your responsibility for the debt is a gray area. Technically, if you took the ambulance ride and the debt is legitimate, you are responsible for paying the debt no matter how many errors the hospital or collection agency made when trying to collect it.

You said you spoke to a hospital administrator that assured you all bills were set up on a payment plan. If you have that in writing, that gives you grounds to fight this. You'll still be responsible for paying it, but you can probably use that statement to convince the hospital to pull the debt out of collections (and no matter what they tell you, they CAN pull the debt out of collections--even if the account was actually sold and the debt collector isn't working on a contingency) and remove it from your credit report. If all you have is someone's word, you lack proof that this was a legitimate error. It's also possible that the ambulance company bills separately from the hospital itself and that's what caused the issue.

If the ambulance company does not bill separately from the hospital and you have a statement in writing from the hospital noting that all of your debts have been added to a payment plan It could be argued that, if they hadn't made these errors, you would have paid the debt before it ever hit your credit report. In general, however, you aren't absolved from your responsibility to pay a debt simply because you didn't receive a bill.

If the statute of limitations has expired, you are no longer legally responsible for the debt and they can't force you to pay it. Keep in mind that the collection will remain on your credit report regardless of whether you pay the debt or not, and paying a collection account does not improve your credit scores. You do have the right to dispute the debt both with the collection agency itself and the credit bureaus.

If you have the funds to do so, you might consider hiring a consumer law attorney to help you. I don't know the full details of your case, but the original creditor obviously made some blatant billing errors that cost you your good credit rating. A good attorney should be able to help you straighten this out, even if it means filing a lawsuit or two to strong-arm the hospital into taking you seriously and recalling the debt.

One last thing, while you're disputing the collection you should also consider disputing those addresses on your credit report for places you never lived. You don't want another creditor to bill you at one of those addresses only to have this nightmare scenario repeat itself.

Best of Luck
Lee

Q&A: Does Agreeing to Pay Collections Restart the SOL?

Hi Lee,

I have two negative reports on my credit report, they are both supposed to fall off in 2 years. I made the mistake of calling both collection agencies, and agreed to make payments in the next couple of months. I can certainly pay them, however, I am worried that paying the full debt may reactivate the 7 year negative credit history. 

Can agreeing to pay the debt restart 7 year negative history? These accounts are so old, I have no record of any paperwork, and no one can seem to tell me the exact date of first delinquency. 

Should I just pay the full debt, have them agree to report to credit bureaus as 'paid in full?' Will this help my score and to have it removed from my report when the 7 yrs is up?

Thanks for any advice you can offer.

--Jenny


Jenny,

You're confusing the statute of limitations for lawsuits with the credit reporting period. The statute of limitations is the amount of time a collection agency has to sue you and the credit reporting period is the amount of time an item can remain on your credit report. These are two entirely different time periods.

Making a payment on a debt that's in collections does NOT restart the 7-year credit reporting period. The clock starts when the debt first becomes 180-days delinquent. Although you may not know when the date of first delinquency occurred, pulling your own credit reports should show you when the negative entries are scheduled to be removed from your credit report. If it were me, I'd pull my credit report right now and print it out. That way, if the collection agency (or any other debt collector that may purchase the debt in the future) decides to "re-age" the debt and reinsert it onto your credit report, you'll have rock solid evidence to provide to the credit bureaus proving that the debt in question is obsolete and should be removed.

Unfortunately, making a payment on your debt does have one very negative effect: It restarts the statute of limitations in most states (in some states you must agree in writing to make a payment before the SOL begins anew). Once the statute of limitations is back in force, the collection agency regains the right to sue you. You don't mention which state you're in (the SOL differs by state) but you did mention the debts are old. Thus, its likely the statute of limitations has already expired.

Agreeing to pay collections--and then following through with that promise--can be a very risky prospect if you're not paying the debt in full all at once. This is because, unless you have a written agreement with the collection agency that says otherwise, the company has the right to file a lawsuit against you as soon as the statute of limitations kicks back into gear--even if you haven't missed a single payment. As it stands, if the SOL has expired, the collection agency's hands are tied. They only get the money if you pay voluntarily.

So don't panic. It's easy to become intimidated by a debt collector and agree to pay a debt when you can't (or shouldn't), just to get off the phone. The good news is that agreeing to pay won't likely hurt you. If you weren't merely intimidated and you genuinely want to take care of your debt, make sure that you secure a solid agreement, in writing, with the collection agency that stipulates the company agrees not to sue you unless you miss a payment.

Wanting to take care of unpaid debts is admirable, but be warned: paying off collections does NOT improve your credit scores. Collection accounts have the same negative impact on your scores whether they're paid in full or you've never paid a dime.

In my opinion, paying this debt is pointless. It doesn't help your credit and the credit reporting period doesn't change. Whether you pay it or whether you don't, it will still remain on your credit report for another two years.

Best of Luck,

Lee

Re-aging Delinquent Lowe's Credit Card Account

Reader Question:

Lee,

I recently moved to a new area. I have a credit account with Lowe's. I called Lowe's and gave them my new address. I know they had the proper address because I got a credit card statement from them a couple weeks after I moved in. That statement in May was the last one I ever got. After that I got nothing from them, no bills, no statements, nothing. I am not signed up for automatic bill pay, so I should have been getting bills but the bills never came! 

It took me a while to realize that I should have been getting bills and wasn't. I know its my responsibility to pay whether I get a bill in the mail or not, but the bill itself is what reminds me to pay. Anyway, as soon as I realized I hadn't been getting bills I called Lowe's and asked about it. As it turns out my account was over 60 days late and had racked up tons of late fees and interest fees. 

The customer service rep for Lowe's said that they had been sending mail to my new house but that most of the mail had been returned. That makes no sense since I received the first bill with no issues. The rep waived the interest charges and late fees on the account and brought it current. When I asked how this would affect my credit score, she said that a 30 day late takes 90 days and that she had re-aged the account anyway so it didn't matter. 

I felt good about it when I got off the phone but now I'm getting nervous. I'm not sure if I believe that a 30 day late takes 90 days, and isn't re-aging accounts a bad thing that would hurt my credit rather than help it? 


Brooklynn



Brooklynn,

I can't explain why some of the Lowe's credit card bills and statements are arriving in your mailbox and some are being sent back to Lowe's headquarters, but I can explain about the late payment notations and the account re-aging.

30-day lates are notoriously misleading. For companies that send reports to the credit bureaus every 30 days, a 30 day late appears on the credit report of any cardholder whose account was 1-30 days late when the credit card company sent in its report. The kicker here is that not all companies file reports with the credit bureaus every 30 days. From what the Lowe's credit card rep is telling you, it sounds like Lowe's only  makes credit bureau reports every 90 days. If this is the case, however, your credit report would reflect a 30 day late, a 60 day late and, if you passed the 90 day mark, a 90 day late. You definitely don't want that to happen. Each late payment notation builds on the one before it. By the time you reach a 90 day late, your credit has been decimated.

As far as your account being re-aged is concerned, there is a big difference between collection agency re-aging and credit card company re-aging. When a collection agency re-ages an account, it alters the original dates on the account to make the account appear more recent. Not only does this mean the debt knocks out a bigger chunk of your credit score (since recent items carry a greater weight in the credit scoring formula) but it also tricks the credit bureaus into leaving the bad debt on your credit report for longer than the 7-year reporting period. Collection agency re-aging is a nasty business, and very illegal.

Credit card company re-aging, however, is beneficial. When a credit card company re-ages your account, it brings the account out of delinquency and erases the delinquent history. Depending on how the Lowe's credit card company's computer reporting system is set up, this can eliminate any late payments that have already been reported to the credit bureaus.

Keep in mind that customer representatives at credit card companies often know little to nothing about credit scores and reporting practices. They will often say whatever they need to say to get you off the phone – especially if you're asking questions they don't have the answers to. I'm not saying this was necessarily what happened in your case, only that its possible.

If Lowe's actually did clean up the mess, then good for them. It's not often that customer service representatives are willing to help a customer out without that customer taking drastic action or demanding to speak with a supervisor. If I were in your situation, I would go pull a copy of my credit report from each of the three credit bureaus and review it, just to be safe. If you find late payments, its time to call Lowe's credit card services again, but skip the customer service representative and ask to be immediately transferred to a supervisor. It's awesome that they re-aged your credit card account, but if they didn't erase the late payments as well then they still have work to do.

Best of luck,
Lee


*Do you have a question for Lee? Send an email containing your question to LeeEdwards@mail.com and your question may be the subject of an upcoming post. 

Reader Question: Citibank Charge-Off in Collections. Can I Settle?

Lee,


I have a $7,500 credit card bill with Citi.  They just charged it off.  They asked for $2,500 to settle but I didn't have the money.  The date of charge-off was XX/XX/XXXX, but I didn't receive the letter until it was too late.  I want to deal directly with Citi but they told me the account was sold to a collection agency.  What can I do?  I want to deal directly with Citi.  Can they pull the account back from the collection agency?  Should I pay?  Who Should I pay?  Will I be sued?  Should I wait seven years?  How do I get the best entries on my credit report?  I don't know what to do.  Please help ASAP.  I want to call them immediately.


Thanks,
Bobby

Bobby,

For future reference, when a credit card company offers a settlement you can always ask for a payment plan. I don't know a single person with outstanding credit card debt who just happens to have $2500 laying around that they can negotiate a settlement with.

The charge off date was fairly recent. At this point you should be able to work out a deal with the collection agency in which you pay off the debt in installments and they agree not to report the debt to the credit bureaus. If the company agrees, get everything in writing before you pay them a dime. Collection agencies aren't known for their honesty. It won't negate the charge-off on your credit report, but it will prevent you from being sued or facing additional credit damage when the collection agency adds its negative tradeline to your credit report.

I know that you don't want to deal with a collection agency, but you no longer have that choice. You can always call Citibank and explain that you want to pay the debt, but – and I'm being brutally honest here – the odds of Citibank agreeing to recall your account from the collection agency aren't good. Unless you walk in swinging the full $7500, you'll probably get transferred from rude representative to rude representative until you get frustrated and hang up. If Citibank will take the payment, however, go for it, but keep in mind that a payment plan is unlikely to be a possibility at this point.

As far as a lawsuit goes, the higher the debt, the more likely the lawsuit. In this case, the collection agency will pull your credit report, examine your employment history and decide whether or not to sue you based on that information. For example, if you have a full time job, own your own home and are not subject to any wage garnishments, you'll probably get sued over a debt as high as $7500 – and they'll sue for the full amount, not the settlement amount. If you're over 65, a renter and living on Social Security, however, suing you is pretty pointless since they can't garnish Social Security or place a lien on a rental home. Whether or not they sue just depends on your specific financial situation.

Waiting seven years has nothing to do with getting sued. The statute of limitations for debt collection lawsuits in your state determines how much time a collector has to sue you. The seven years just refers to the amount of time the entry remains on your credit report. Whether you pay it or not you still have to wait out the seven years for the charge-off to come off your credit report. If you can work out a payment arrangement with the collection agency before they report the debt to the credit bureaus, you may not have to contend with an additional negative entry.

Here's the rub: The longer you go without paying, the more likely the collection agency is to offer you a lower settlement, but trying to wait out the collection agency is a gamble if the debt is still within the statute of limitations because the company could sue you at any time. In my opinion, your best bet right now is to try and negotiate a settlement with the collection agency in exchange for the company not reporting the debt to the credit bureaus.

As far as your credit goes, just keep paying your bills on time. I could sit here and give you a breakdown of millions of little tips and tricks, but you can find that information anywhere. Your best bet is just to continue paying your current creditors and always pay on time. The more time that passes, the less the charge-off on your credit report will hurt you. Entries lose importance as they age.

Lee


Do you have a collection question you can't seem to find the answer to? Send your questions to LeeEdwards@mail.com and they may become the topic of a future post.