Can a Debt Collector Collect on a Second Debt Without My Consent?

If you’d been faithfully sending checks to a collector and hadn’t been getting acknowledgements for your payments, you might understandably wonder what your balance was or how close you were to having the debt satisfied. Imagine how you’d feel if you discovered that the collection agency was now applying your payments to a second debt — without your knowledge or consent. Can they do that?

A reader, “smartin,” had precisely that question, only she had taken some action and was now getting “nasty voice mails” from the collector. Here’s her situation as she describes it:

I was paying off a debt with a collection agency for a number of years (the debt was for over $5000) and I had never received any letter showing how much i owed on the debt. I called them to see how much i had left to pay and they told me that i had completely paid off the debt, but that now i was paying on a different debt. I never received a letter or phone call about any other debt. I never gave permission for them to take my payments and apply them to any other debt. I asked for some validation for the new debt and they got very nasty. I waited for about a month to receive paperwork showing the new debt information and never received anything, so i put a stop payment with my bank. Now I am getting some really nasty voice mails. I am wondering if i did the right thing and what i should do now?

We took her questions to two debt collection experts, Nick Jarman, who works in debt collection, and Michael Bovee, who helps consumers with debt issues.

Jarman, chief operating officer of Delta Outsource Group, says a collection agency may begin to collect on a second debt, but with some important qualifications. The collector must have an “initial communication” (a letter or phone call) about the second debt, followed within five days by a “validation notice” outlining how much is owed and listing the consumer’s rights as they pertain to the collection of the debt.

Here’s what should have happened: “Once the account the consumer was paying on was paid in full, the collection agency should have reached out to the consumer via phone or mail to inform them that the original debt was paid and also let them know another account has been placed in their office. From there, the collection agency should have worked with the consumer to work out a repayment agreement on the new account,” Jarman said in an email.

Bovee, founder of the Consumer Recovery Network, said a situation such as the one “smartin” described would be extremely uncommon in today’s regulatory environment, and he suggested she submit a complaint to the Consumer Financial Protection Bureau and/or consider consulting a consumer law attorney with a practice focusing on debt collection violations.

Jarman suggested that our commenter make a written request to the collection agency for a validation of debt and also try calling the collection agency again. “I would . . . recommend the consumer calling the collection agency and asking to be immediately transferred to a supervisor to explain the issues they have been dealing with. Especially since the consumer already paid off one debt with the collection agency, the supervisor should understand the consumer is trying to do what is right and help them get this resolved,” he said.

As for the stop-payment, Jarman said it was a prudent thing to do. “Based on the understanding the collection agency has not complied with their requirement to provide the consumer with their rights as it pertains to validation of debts, if the collection agency fails to provide the validation of debt information as requested and/or continues to leave ‘nasty voice mails’, the consumer should reach out to their state attorney general or the Consumer Financial Protection Bureau for assistance.”

Bovee noted that the CFPB is “keenly focused on debt collection issues” right now, and that using the complaint portal is an excellent way to get collection issues in front of them. And when the CFPB is involved, debt collectors pay attention, he said.

Finally, it’s a good idea to keep up with “credit hygiene,” checking your free annual credit reports. Our commenter can also see her credit scores for free on Credit.com. A collection account can have a major impact on your credit, so it’s a good idea to track your progress as you pay off debts and rebuild your credit scores. And while paying off her collection accounts won’t help our reader’s credit immediately, resolving debts means they won’t be placed with yet another collector.