These kinds of debts can sneak up on you in the form of an unexpected collection account, and even though they’re small, they can still hurt your credit substantially. Often people first learn about them when checking their credit reports.
What can be done about them?
For the answer, we’ll turn to the Fair Debt Collection Practices Act.
Section 809(a) of the FDCPA states:
"§ 809. Validation of debts
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer
by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the
original creditor, if different from the current creditor."
The first thing to understand here is that if the FIRST time you hear about the collection is when it shows up on your credit report, there is a good chance that the collector has violated this law.
By the definition of "communication" provided in the FDCPA, the act of reporting the debt to the credit bureaus is a "communication" and even if that were the first and only "communication" that the debt collector made in conjunction with a debt, they should, according to the FDCPA, provide the information listed in Section 809(a).
You can use this possible violation of the law as leverage for the "pay for deletion" method.
"Pay for deletion" is exactly what it sounds like. You pay the debt in exchange for deletion. This makes a lot of sense for small collection accounts that are hurting your credit but aren’t enough money for the collector to justify fighting (or suing) over.
Sometimes it is difficult to get collectors to agree to this, but if you tell them that you believe they have violated the law they may be more eager to settle the matter and make you "go away!"
This method CAN still be done without any initial evidence of a violation but it is IMPERITIVE that you get the collector to agree to remove the account in writing, or at the very least record the phone call in which they agree to do so. (Please check laws on recording phone calls in your state before doing this!)
Here’s an example letter that one might start with:
I was shocked when checking my credit reports recently to find a collection in the amount of $30 being reported by your company. I don’t ever remember having a [balance/account/etc.] in that amount and I have no idea what this is for.
Furthermore, it appears you have violated the law which states that within 5 days of your initial communication about this debt, you are supposed to notify me of a few things. I did not get that notification from you as described by the law.
I do not (and will not) say that I owe this debt–I don’t believe I do–but since it is such a small amount I would like to offer to PAY it in exchange for the REMOVAL of this entry from my credit report.
It is my opinion that this should never have been reported, and I think we can both agree that it will be easier for all of us if I can simply pay the amount due in exchange for the prompt removal of this item from my credit report.
I believe this arrangement is win-win for both of us, as something has obviously gone wrong with this account and this allows it to be corrected with "no harm done."
Please respond in writing and let me know if you will agree to this arrangement.
If everything goes well, the collector agrees and you pay $30 to have the item removed from your credit report. That’s a pretty fair deal.
But what if the collector fails to remove the item after you have paid?
For that, we have to go back to the FDCPA which states that "The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer" is a violation of the law.
This means that if the collector agreed to remove the item in exchange for payment, and then failed to follow through with the removal, they used DECEPTION as a means to collect the debt and have violated the Fair Debt Collection Practices Act.
At this point you simply turn up the heat.
An escalated letter to the debt collector is a good place to start.
This can be followed up by BBB complaints and even state attorney general and FTC complaints. You have every right at this point to follow up aggressively with the collector as they have violated the law.
In this type of situation, a little persistence will usually pay off and that will be the end of the matter.
You may wonder why you’d want to pay a collector when it is for such a small amount. The reason is simple: it’s easy, and could be relatively inexpensive in the long run compared to the alternatives.
Note that you don’t necessarily have to use this method first. You could start with debt validation and go this route if that fails. Whether you choose to start with it or not, it is certainly a useful tool to have in your credit repair tool belt.