Should I pay, and if so, who?

December 1, 2006 10:26 AM

Should I pay the credit agency that has hounded me? It sounds silly that way, but there's always a story...

We've got this medical bill from an ambulance company that requires proof that an amublance transfer was "medically necessary" for our insurance to pay it. It was, without question, but for a variety of reasons (mostly due to the massive inconvenience of getting everything together) I haven't been able to get the signed statement out of the provider yet.

It's been over a year now, and the bill has been transfered to a credit agency for some time now, and they kept hounding us for some time, and now they've stopped. But we still haven't paid.

This isn't a huge amount for me (a few hundred) at the moment, though it's not trivial. We're of course accruing heinous interest on the balance right now.

1. I'm assuming I should pay, right? If so, do I pay the credit agency? Or have they somehow "written it off"? I haven't really dealt with this kind of thing before. I'm not under the impression that I should *not* pay, but there's all sorts of odd advice out there.


2. Should I bother getting this paid by insurance after I pay it? If I manage to get proof to the insurance company, will they then send payment to the ambulance company (and not the credit agency), and I'll never see it? If they still manage to send it to the credit agency after I pay them, would I see it?

3. What is the likely effect on my credit? We have had ultra-super amazing credit rating, so it'll be sad to see that get tarnished. If there is negative effect, can I mitigate or eliminate it?

posted by RikiTikiTavi to work & money (16 answers total)

You should check with your insurance company, but I'd be surprised if they'll pay the interest and penalties for you not paying the bill in the first place. If you pay it, and then prove it was necessary, they'll reimburse you for paying for it, but they won't generally suck up a bunch of extra fees and fines for no one having paid it originally.
posted by jacquilynne at 10:43 AM on December 1, 2006

Don't be fooled by the silence. The debt hasn't gone anywhere, except perhaps to a different agency. You can play that game for years, waiting until they give up or the debt ends up with another company, but it'll never just disappear.
posted by loiseau at 10:52 AM on December 1, 2006

don't pay the whole thing. negotiate a settlement.
posted by ewkpates at 11:11 AM on December 1, 2006

loiseau is not correct, exactly. A debt will disappear, or at least stop having the force of law behind it, when the statute of limitations expires. The debt will exist forever and can be passed from person to person who can call you up asking for your money, however they have no right to sue you once that time is up. That, combined with your right under the Fair Debt Collection Protection Act to order them to never contact you again under any circumstances, means you can just tell them to pee up a rope and they'll just have to sell it to another junk debt buyer who will then call you.... lather, rinse, repeat.

However, you are not at that point and likely will not be. If they have a good case they will eventually (before the SoL expires but after a lot of fees & interest have racked up) file suit and get a judgment against you. Judgments go on a long time - longer than SoL in most states - and are renewable.

Much to your misfortune, you're in California and therefor under the 9th circus circuit, who has said that if you miss your 30 day window to ask for validation of the debt you are largely out of luck. Doesn't mean it's not worth trying, but you may have less success.

Sadly the excellent Art of Credit website seems to still be dead, but you can go over to DebtorBoards.com and join the forums to ask for assistance. You'll find a lot of discussion about how to get validation and ways to handle the situation. If you're at a point in your life where your time is worth less to you than your money then there's a lot of things you can do.

Do be careful about just paying it when you have the money, however. One of the sad gotchas in FICO scoring is that a recent paid chargeoff is worse for you than an old unpaid one. If they're not reporting to any of the three credit agencies and might in the future then you're going to want to try to get an agreement from them that they won't ever report.

You can look at some of my older AskMe answers for more credit report & collections information.

As far as should you try to get your insurance to pay it... why wouldn't you? Are you going to get a refund on your old insurance premiums if you don't get them to settle their end of the deal? You paid for that insurance, get every penny you're entitled to out of it.
posted by phearlez at 11:22 AM on December 1, 2006

I had a $1k ambulance bill following a motorcycle accident in 1995 that I didn't pay. Various credit agencies would call me over the years, and I'd tell them not to waste their time - I wasn't ever going to pay it. Sadly, the old 7-year credit report dropoff myth proved untrue, and 9 years later, when I went to buy a house, I had to bite the bullet and pay it off.

If you have a super ultimate credit rating, I'd pay this ASAP and worry about getting your insurance company to reimburse it later. It'll never just go away by itself.
posted by M.C. Lo-Carb! at 12:42 PM on December 1, 2006

Artofcredit.com is still available via google cache.
posted by Mr. Gunn at 1:34 PM on December 1, 2006

Listen to phearlez, not to M.C. Lo-Carb.

M.C., you screwed up somewhere by letting them re-age your debt, which they probably did illegally. Either that, or the credit bureau didn't delete it after 7 years like they're required by law to do. You could have not paid them, gotten them to delete your report, and sued them for violating your rights, once the 7 years was up.

phearlez is right. As stupid as it sounds, simply paying the collection agency won't improve your FICO one bit, and can hurt you by re-aging the debt, making it that much longer before it (is supposed to) drops off your record.
posted by Mr. Gunn at 1:40 PM on December 1, 2006

First you should check your credit report and see if it is, in fact, being reported. Not all medical collections are.

If it is being reported, call the agency and try to negotiate a settlement. "Heinous interest" is there in case they have to take you to court and cover court costs. Their main goal is making a profit, as long as they're still coming out ahead you may not have to pay the amount including interest that you were being quoted.

If it is not being reported, it might be that they've given up (quite likely if the principal was relatively small, say, a couple of hundred dollars). Or it might be that they will eventually take you to court, probably small claims or conciliation court depending on the dollar amount in your jurisdiction. If they take you to court, they will likely get a judgment against you--that would definitely show up on your credit report and screw it up.

If they are not reporting now, and you pay them and resolve the matter, it is unlikely that they would then start reporting it to the bureau. Not impossible, but very unlikely.

So to attached the answers to your numbered questions:

1. If you know you the money is owed, then of course you or someone should pay. You might be able to get away with not paying, but that is a gamble.

2. Check your insurance policy, and/or call them to see how they handle such situations. Probably your best bet is to have the payment from insurance submitted to you, while you pay the collection agency directly in turn. The insurance company might be confused by remitting the amount to the collection agency. If the insurance company sends the amount to the ambulance/hospital, then you face the extra legwork of making sure the money or the info that the debt has been settled gets forwarded to the collection agency, which seems like a hassle.

3. If it's being reported, it's a medical collection. Some lenders will ignore it. It will still cause a hit on automated scoring and rating systems such as FICO. You may find yourself shut out of some credit opportunities, or you may find yourself in a cycle of being denied credit, sending in an explanation, and then being approved credit. An open judgment is less likely to be ignored, since it raises the possibility that your income or other assets could be garnished. Many existing accounts (such as dept. store credit cards) will probably continue as though nothing happened. Some Visa/MC cards may have fine print in their agreements allowing them to raise your interest rate if they think you're suddenly more of a risk.

This is speaking with several years of experience in credit analysis and debt collections, both retail and small business.
posted by gimonca at 4:14 PM on December 1, 2006

This may be an unpopular opinion, but I think that you should go ahead and call the ambulance provider and offer to work with them directly. Explain the situation to them and see what they have to say. If they think that you're just going to not bother and are going to stiff them, yeah, of course they'll send it to a collection agency.
They might say "sorry, you have to deal with the collection agency" but you never know. It's certainly worth a shot. If you pay them, your insurance company oughta reimburse *you* for it.
posted by drstein at 8:05 PM on December 1, 2006

"file suit and get a judgment against you" Oh, and I can tell you from experience. Once they get a judgement against you, they will waste no time going after everything they can. Once they get a judgement, they can practically waltz into your bank and drain everything but $0.01 out of your account and then serve your employer with paperwork to garnish your paychecks for the rest of it.

Creditors can be ruthless, disgusting motherfuckers sometimes, and the law lets them get away with a lot. FCRA violations are very common. They'll even tell you "Yeah, good luck proving it." Never deal with ANY creditor over the phone. Do it all in writing.
posted by drstein at 8:08 PM on December 1, 2006

You say this isn't a huge amount for you.

Pay it, get it over with, move on.
posted by ASM at 1:18 PM on December 2, 2006

It either won't make a difference or will actually hurt your score to pay it. I know that sounds messed up, but as I explained above, "just paying it" won't get it over with. Read what other people have done in your position, determine whether you'd have more success with "pay for deletion", getting the bureaus to delete the record, or something else.

I'm not recommending fiscal irresponsibility or suggesting you try to cheat someone out of what they're owed. I'm saying that at this point, after the situation has gone this far, you have to protect your rights from being more trampled upon than they already are, and there are only a couple good strategies for doing do. One thing working in your favor is that the collection agency bought the debt from the company for pennies on the dollar, so they're not losing as much as you may think by settling, though you have to force them to admit this by using one of the strategies that people have written about.
posted by Mr. Gunn at 5:53 PM on December 2, 2006

will actually hurt your score to pay it

That's an urban myth that needs to be stamped out. It is not in the interest of the agency to start reporting an account that's never been reported before just because it's paid. If they wanted to report it, they would have from the beginning--when they can use it as leverage to get you to pay. Once the amount is paid, they simply don't care one way or the other. They're not going to flip a switch and start reporting it just to tweak you.

Date opened and date of last payment are two different fields in the report. You don't change 'date opened'--otherwise, it would appear that the account had been paid faster than it actually was. Date opened may reflect the date that the debt was transferred to the agency, but it does not reflect the date of last payment. Once again, it is against the collection agency's own interest to handle these dates incorrectly.

Agencies are all about getting the money. Harassing people simply for the sake of harassment, when there's no more money at stake, is not something that an agency will waste their time doing if they want to remain profitable.

Not paying will increase the risk that you will be taken to court and have a judgment entered against you, which will definitely show on your report and definitely have an effect.
posted by gimonca at 10:41 PM on December 2, 2006

Still sorting out answers, thank you. I'll just clear the air a bit.

First, obviously, the ambulance company was owed money. However, after they sold it to the credit agency, I have no idea what happens if the insurance company pays them, again. If I pursue the insurance hassle after having paid, I want to make sure that it's going to me at least.

Second, I understand that I legally need to pay them, and I don't have a problem with that responsibility. My question is, essentially, how exactly I should do it that is in my best interest. I don't want to make a bad situation worse.

I will be following gimonica's advice. after I find the paperwork about who to contact, account number, etc. This is likely part of the reason I have this problem now.
posted by RikiTikiTavi at 11:31 PM on December 3, 2006

The main role of a collections agency, and why they're used by creditors, is to screw over your credit. Once your account has gone to a collections agency, the original creditor no longer expects to see a penny of it and will be taking a write-off on the whole thing. They're done. The reason they use a collections agency is because the collections agency will pay them a couple percent of the amount owed, which is better than nothing, and in return, the collections agency makes sure no other creditor will lend to you, at least for the next couple years.

You have no obligation to pay anyone, at this point, except the collections agency, and then only if they can prove it. How much you should pay them depends on how much you can get them to agree to take. They paid the creditor a couple percent of your debt, so anything over that is just money in their pocket.

The only thing paying the collections agency does, at this point, is keep the collections agency in business. You may be able to make an arrangement with them to the effect that they quit screwing over your credit in exchange for money, but you have to find some way to force them into it.

As far as re-aging your debt goes, well, when you pay you now have a new, more recent "Date of Last Activity". That's generally a bad thing. Please be sure you understand your rights and obligations before doing anything. You're going to get screwed, it's just a question of how much and by who.
posted by Mr. Gunn at 8:41 AM on December 4, 2006

"That's an urban myth that needs to be stamped out."

Many financial experts disagree with you. I believe Suze Orman is one of them.
posted by drstein at 10:07 PM on December 9, 2006