Can I Pay the Original Creditor Instead of the Collection Agency?

Getting calls from a collection agency is stressful. You may want to resolve the debt by paying the original creditor instead. But is this possible and advisable? Here’s what you need to know about paying original creditors versus collection agencies.

What Happens When a Debt Goes to Collections?

If you don’t pay a debt like a credit card or medical bill on time, the original creditor may give up trying to get the money back from you. They will “charge off” your account and give the debt to a collection agency.

The collection agency buys your debt from the original creditor for very little money. They make money by getting you to pay as much as they can.

Legally, the first creditor gives the agency the right to collect your debt. That debt is now owed to a collection agency instead of the original creditor.

Why Paying the Original Creditor Can Backfire

It’s understandable to want to bypass the collection agency and repay your original creditor directly. But doing this can backfire:

• You may still owe the debt collector. You have to pay the collection agency because the original creditor sold or assigned the debt to them. Even if you pay the first creditor, the agency could still go after you for the rest of the money.

• The original creditor may keep your payment. Since they no longer own the debt, the original creditor is not required to forward your payment to the collection agency. You end up paying twice.

• It can hurt your credit. The collection agency can continue reporting the unpaid debt to credit bureaus. This damages your credit score.

• You lose leverage. Collectors often agree to settle debts for less than the full amount. But if you pay the original creditor first, you lose negotiation leverage with the agency.

How to Pay the Original Creditor

Despite the risks, repaying your original creditor directly is possible in certain situations:

• The debt is with the creditor’s internal collections department. If the creditor still owns the debt and is attempting to collect in-house, you can work out a repayment plan directly with them.

• You’ve started repaying the collector If you’ve already worked out a payment plan with the agency and begun making payments, the original creditor may be willing to take the debt back. But there are no guarantees

• You negotiate a deal upfront. Get written confirmation from both the creditor and collection agency that the creditor will recall the debt before making payments only to the original creditor.

Even in these cases, the creditor is not obligated to work with you directly. Tread carefully.

Tips for Bypassing Debt Collectors

If you want to avoid dealing with collections and repay your original creditor, here are some tips:

• Act quickly to contact the creditor as soon as you miss a payment on a debt. Waiting too long reduces your options.

• Explain your situation and ability to repay honestly. Negotiate a reasonable payment plan.

• Get agreements in writing to protect yourself legally and financially.

• Consider credit counseling to mediate and consolidate debts if the above strategies fail.

• Prioritize high-interest debts if working with limited funds.

• Keep communicating with creditors and collectors at all stages. Silence can make matters worse.

• Know your rights under consumer protection laws like the Fair Debt Collection Practices Act. Seek legal assistance if you need it.

The Bottom Line

It is risky to repay only your original creditor once a debt goes to collections. The best approach is to work out a deal upfront with the creditor and collector. If that fails, dealing directly with the collector may be your only option. Tread carefully and know your rights when managing debts in collections.