Debt Collection, Garnishment, Repossession

questions & answers

Question: Do I have to pay the credit collection agency or can I choose to pay the original debtor? After all I have no contract with the collection agency.

Answer:

The following answer is provided for informational purposes only. To find out what is appropriate for your situation, you may want to contact an attorney.

Information on Debt Collection:

The complete answer to this question is based on the legal principles of agency. Generally, the creditor gives the collection agent the authority to collect the debt, probably in a written contract. This is called "express authority." Technically speaking, in a perfect agency situation a person IS required to pay the agent (debt collection agency) directly since he was retained for the purpose of collections. 
For example: when you go to a fast food restaurant, you don't insist on depositing your four dollars into the restaurant's cash register. You give it to the worker, who is acting as an agent for the restaurant. This example involves the Principal (Restaurant), the Agent (worker), and the Buyer (you). However, every situation has different requirements, depending on who is standing in those three positions. 
In a debtor/creditor situation, the agency's contract more then likely has a provision dealing with instances like yours, so they have contractually solved the strict legal requirement. Therefore, in this industry the answer is technically no, you don't have to pay the credit collection agency directly. However, the creditor could refuse to accept your payment because they have hired the agency for that purpose.
If you are dealing with a reputable and professional collection agency or collection law firm, they all know these rules, and the creditor knows them too. Many creditors will take the payment directly from the debtor if it is still at the collection agency level, but many creditors will refuse payment if it is being handled by a law firm
However, in almost all situations the agency or firm will still get credit for the collection, still get their portion of the fee, and still report to the credit bureaus as if you had made the payment to them instead of going direct the creditor. The account may remain at the agency or law firm indefinitely, or at least until the payments are current or the account is paid off.  If you are trying to "cut out the agent" monetarily, it is unlikely to happen. Large agencies and creditors have electronic balances that reconcile and update daily. 
 
This answer also assumes:
1) You do not have a negotiable instrument (negotiable = check, non-negotiable = credit card, auto loan, personal note, etc.).
2) The creditor is not actually the collection agency. (Sometimes creditors sell debts directly to the collection agency, called "assigning the debt").
However, because each situation is individual, you may want to contact an attorney to find out what you should do in your specific situation.

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