How do I negotiate with a collection agency?

March 10, 2008 11:15 AM

How do I negotiate with a collection agency and make them notify the original creditor right away?

A few weeks ago I got a call from a creditor claiming I had a debt to my university from five years ago. I told them to send me more information. I received a letter which claimed that I owed $299 plus approximately $100 in "collection fees." I then sent the agency a letter asking for further validation, including the breakdown of specific charges. It was a standard validation letter text that I found online, minus some of the threats of legal action. I have not heard back from the collection agency since.

However, I have decided that I want to go back to school and thus need my university transcripts before mid-April. I called the university and found out that the original $299 was a valid debt to them, but since they have sold it to a collection agency they will not accept my payment directly.

I need to know how to negotiate with the collection agency -- a thirty three percent markup on the original debt seems out of line, not to mention the fact that they probably paid ten percent for the debt in the first place -- but I want them to notify the university immediately, so I can get my transcripts.

Any tips on how to do this? I've seen some instructions online but nothing detailing this type of situation, where letting them know that I need them to notify the original creditor vs. the credit bureau might tip their hand and make the deal I could get less desirable.

Thank you for any help you can provide.

posted by anonymous to work & money (10 comments total)

So you did really owe the $299 to the university? Then I'm not sure you're in a position to negotiate with the collection agency about their fee, especially if you want to ask them to do something for you.

If this was an interest-bearing debt, it would have increased by far far more than 33% in five years. I think you're still getting off easy.

On the other hand, it can't hurt to ask. The faster you pay, the more profitable the transaction is for the collection agency. Make a proposal that you'll pay some amount somewhere in between $300 and $400 (in cash or money order) delivered immediately (or next day if they're not local) and see what they say.
posted by winston at 11:25 AM on March 10

I just did the math. For the debt to grow from $300 to $400 in five years, with no late fees, etc., is equivalent to 6% interest (compounded monthly).
posted by winston at 11:41 AM on March 10

As always, make sure you correspond in writing (or get telephone agreements in writing) and send everything via certified mail. Also keep a log of the names and contact info for the people you deal with. Verify that the company on the other end of the phone is actually the same company the school sold the debt off to... otherwise you could be throwing your money away.

Remember that there is absolutely zero incentive for them to follow through with reporting your payment to your school after you pay them. Plus, collection agencies are staffed by cretins... so... play it safe, get everything in writing before you pay up. An agreement with a corresponding receipt should be enough for your school, but I would keep calling and asking around admissions until someone can verify how this process works exactly. Someone must know.

Good luck!
posted by wfrgms at 11:47 AM on March 10

Yes, the advantage of paying in person is that you can walk away with proof of payment in your hands.
posted by winston at 12:05 PM on March 10

First of all, you need to be absolutely certain that the collection agency has actually bought the debt from your school. It's possible the school still owns the debt, but has outsourced collection to the agency. If the school actually owns the debt, mail a $299 check to the bursar's office with a letter and see if you can just get this to all go away.

Otherwise, keep in mind that the collection agency bought this debt from the university for pennies on the dollar. While they may play hardball, they should actually, in truth, be thrilled to get $299 from you. You could try offering them that price in writing with a promise of immediate repayment and see if they'll accept your offer.

Also, your original contract with the school should have stipulated interest rates and late fees as part of the agreement. These terms should (IANAL) apply to the collection agency that bought your debt as well and you can insist on them. That being said, as winston pointed out above, if the interest rate in the agreement is above 6% or so (and it probably is), you'll end up paying more this way. Looking at my University's page, they do offer a one-time no questions asked waiver of finance charges. Make sure you can't take advantage of something similar.

Lastly, I'd be really careful of telling the collection agency of your urgent need to have this cleared up. You want them to think you're taking your time here. If they think that you're in a hurry to settle this, they are going to take you for every penny they can.
posted by zachlipton at 12:20 PM on March 10

A willingness to pay immediately goes a long way in negotiating with collection agencies - as winston points out. Typically, the agents work on commission and if they think they're going to get anything out of the debtor they will be highly motivated to close. A pleasant attitude and a statement along the lines of, "I'd really like to get this behind me, but I only have X dollars available," might get the deal done.

I infer that the University won't release your transcript unless the debt is cleared. Have you verified with them the documents or information they need to release your transcript? If they won't accept your payment and have cleared the account, I can't imagine they're too interested in keeping track any longer. I mention this because you may have to go through some hoops with the debt collector to get what you need; if indeed the university will accept anything at all.

On preview: zachlipton's advice sounds good, too.
posted by GPF at 12:22 PM on March 10

Attempt to pay the University. If they refuse to accept it, ask to speak to the manager of the accounts receivable section. If they still refuse, ask for proof in writing that they have sold the debt, and how much they have sold it for. If they refuse again, ask for the manager's name and mailing address, and send a letter to both them and the agency stating that you will pay the debt on receipt of proof that the debt was sold, including a statement of how much it was sold for, and that they assure you that good-faith efforts to contact you before selling the debt were made; OR you will pay the original debt to the university in full, and the university may then decide for itself whether to give the debt collectors any of that money.

Call the agency. Ask them for proof in writing that they have bought the debt from the university, as without that proof there is nothing whatsoever to distinguish them from any common scammer. Tell them that the University have verbally confirmed the existence of a debt, and that it was sold, but have not provided written proof of this. Tell them that you will require written proof before taking any action other than to pay the university the debt, and if they believe themselves entitled to it, they can negotiate with the university. Put it in writing as above.

This worked for me once, ie the original entity I owed the money to magically became willing to accept the full amount, which I paid. I have no idea, and do not care, if they paid the debt collectors anything. That's their business. I got my way, which was worth anything I could have saved, and I paid what I owed and would have paid had they bothered to contact me.

You basically have to make them an acceptable (and fair) offer, and be absolutely intractable about any alterations to it. "No." "No." "No." "You have received my letter of offer, and your choices are to respond to it in writing, or to write off the debt. Do not contact me by telephone again. I am logging these calls, and contacting me further will be a breach of ..." whatever act in your jurisdiction restrains debt collectors from being too annoying - read it "... which I will report to ..." whatever agency enforces the act.

If you want to save yourself some money, you can cry poor and negotiate a percentage offer or something; but that's a different tactic. You need the right combination of the apparent fairness of what you're willing to do, and apparently being way, way too much trouble to make you do anything else. Channel the most stubborn asshole you've ever met.
posted by aeschenkarnos at 6:40 PM on March 10

Definitely seconding aeschenkarnos's advice above. You very much want to deal with the University if at all possible rather than the collection agency.
posted by zachlipton at 7:13 PM on March 10

To clarify, aeschenkarnos's advice is excellent for dealing with debt collection in general. I was answering only the question of how to get the transcripts released as quickly as possible.
posted by winston at 1:04 PM on March 11

Typically, collection agencies buy the debt they're collecting for about 25% of the original. I've successfully negotiated several claims on this basis, beginning at 25% and usually wrapping about around 33%. They hate this, and they dislike informed consumers, but not a single cent you pay will be going back to the University. What you're dealing with is a company that is holding your credit score hostage. Of course, it's best to avoid things getting to this point, but we can't always help that. Good luck!
posted by moonbird at 8:42 PM on March 12