Receiving a sudden call from a debt collector or discovering new collection activity on your credit report for an unfamiliar bill, can leave you with an uneasy feeling. You may be concerned as to why you had not been previously notified of the debt or if you owe the debt at all.
The truth is that some creditors are not required by law to send you a statement prior to sending you to collections, especially among medical bill collectors. The term for this is called “parking” the debt. According to the National Consumer Law Center (NCLC), a debt collector may add medical debt information to your credit report without ever contacting you to collect the debt. In fact, the collector may actually wait for the debt to resurface on its own, such as when you attempt to obtain a mortgage or other line of credit. The debt simply remains in place and the creditor benefits by saving time and resources otherwise used to pursue you.
Even if you pay the debt off upon discovering it, the debt may have already affected your credit score. Also, paying these reported collections do not necessarily result in their removal from your credit report. The Fair Credit Reporting Act (FCRA) requires certain lenders to notify consumers before reporting a debt to the credit reporting agencies, but not all of them.
The FCRA states that any financial institution that offers credit and regularly reports business to credit reporting agencies must provide a notice to the consumer before reporting negative information to the credit reporting agencies. However, the FCRA further notes that this notice “may be included on or with any notice of default, any billing statement, or any other materials provided to the customer,” though it “must be clear and conspicuous.” This means you may be advised of an outstanding debt at the same time it is being applied to your credit report.
The requirement only applies to financial institutions that regularly extend credit, therefore a delinquent cell phone or hospital bill may go into collection without prior notification. If a creditor is required to notify you, they must do so no later than 30 days after a debt was incurred. In most cases, if a creditor delays sending you a bill and upon receipt, you pay it immediately; you should not see negative activity on your credit report.
It is recommended that you regularly review your credit reports. If you see activity that you do not recognize, you may dispute it with the credit bureau(s). It is best to do this in writing. In most cases, if the credit reporting agency is unable to confirm a source within 30 days, it must be removed. By reaching out to the credit bureau directly, your consumer rights are protected under the FCRA.
If the activity is not removed, you may dispute it directly with the collection agency. They also have 30 days to respond back to you. You may also request verification of the debt, to determine its validity.
If you have any questions on this topic or are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.