Can I Bypass a Debt Collector?

When I am assisting people to resolve unpaid bills I’m often asked, “Why do I have to pay the debt collector? Why can’t I just pay my creditor or lender and avoid the collector all together?” A reader recently wrote in with just this question:

I have a $5,000 balance on my credit card and it is now at a collection agency since last month. I have never made a payment to the collection agency yet. Can I pay off my credit card and request to have it reinstated directly through my credit card company? Or is it mandatory to go through the third-party collection agency?
I feel it will be worst for me going through the collection agency to pay off my debt.

It’s natural to want to avoid paying a debt collector. Most of us, given the choice, would want to call the creditor we stopped paying. And sometimes you can deal directly with your original lender. But depending on the type of bill, how long ago you stopped paying, and certainly if you are already hearing from debt collectors, you may have to resolve the bill by paying the debt collector.

Why is it that you are stuck paying a debt collection company? In a word: contracts.

For example, when you open a credit card, the terms and conditions of your agreement will often speak to what happens if you do not make payments, and that generally your account could be placed with, assigned to or sold off to a debt collector.

You have opportunities to work with your creditor to resolve debts. But after a certain length of time without receiving the required payment from you, your creditor is going to drop your account into their established debt collection pipeline. Once that occurs, it is not common to be able to go around a debt collector to your original lender. Here are some things you can expect if you try to:

The creditor will tell you they have your account out for collection and give you the name and number of the agency or firm you should contact to make payment arrangements.
Your creditor has sold the rights to your debt to another company (make sure you confirm the company to whom your account was sold).

You can successfully resolve debts with debt collectors right when they first start calling you. You can also wait them out a little to see if you can strike a better bargain. If you wait long enough, in some instances you may be able to catch your account back in the hands of your lender — if the lender still holds the debt — which would allow you to work directly with them to pay the account. My experience is that the window of opportunity to catch your account between debt collectors is really small, and often not worth the energy as a strategy to pay debts when there are sometimes better deals that can be worked out with the debt collector.

Sometimes your debt has been purchased by a debt buyer rather than just placed with an agency to collect on behalf of the lender. When your debt is purchased, you will have no real options to work with your original lender. But here again, there are sometimes better outcomes that can result with a debt buyer than with the creditor.

Debt Collection Caveats

You should be aware of some warnings about debt collection scams, and making sure the debt collector you are dealing with is either legitimately working for your original creditor, or is the new legal owner of your debt. Calling your creditor to confirm you would be paying the right collection firm, if you have even the slightest doubt, is a must.

Whether or not you can work to reinstate your account at all is going to vary. In most cases, such as with credit card debts that go more than 90 days past due, the answer is no. In fact, many credit card issuers do not place accounts with outside collectors until they close them for nonpayment. And once your creditor closes the account, the odds of reopening it are slim.

If your accounts are not yet several months late, but with a debt collector, you could call the creditor and ask about your options to reinstate your account, or what would be more likely is possibly opening a new account once the prior one is paid in full.

It is worth mentioning that debt collectors will generally have no ability to impact or influence how your original lenders report your account to the credit bureaus. And that even if you are able to work out payments and resolve the debt with your lender, late pays and charge-off reporting will typically stay until they age off (as much as seven and one half years from when your payments stopped).

Over time, you can recover from temporary financial setbacks that resulted in unpaid bills and damage to your credit scores. As you work to rebuild your credit, it’s important to make on-time payments and keep your revolving debt (like credit card debt) low to have the best impact on your score. You can track your progress by getting your credit scores for free on Credit.com, updated every 14 days.