When people learn they’ve had an account that has gone into collection (whether it be utility, medical, credit card etc) their automatic response is to pay the new debt collection company. One would think that this is the appropriate response. Right? Wrong.

In Massachusetts 99% of the time debt collection is done illegally. Did the new company provide you with formal written notice outlining your rights under federal and state law? Did they simply call you and tell you they represent the original creditor and demand payment? Did you find out by seeing your FICO scores tank?

Before paying off a debt collector the smart consumer should always check for a few things:

1. Did the debt collector actually purchase the debt? There are thousands of scam artists out there. For instance, there is company today who purchased a list of all Comcast and Verizon customers who upgraded their systems (which is every person in the world who uses the internet or phone). This scam artist company has gotten in-touch with every person on that list and stated due to un-returned equipment and late fees the consumers now owes them anywhere from $30 to $700 dollars. The consumer (while likely sure they returned the equipment and returned it on time) then pays the company what they ask for because they don’t want their credit ruined or they simply want the daily phone calls and harassment to stop.

Or perhaps the consumer knows he or she truly does have a delinquent account with a creditor . So he or she once again pays the company the balance in demand. These people should pay their bills right? Right and wrong.

What should the consumer have done? Asked for Proof of Assignment the contract which shows the purchase and sale of the debt. Is this new company a “real” company? Is this debt collector even licensed in the state? (90% of debt collectors attempting to collect debts in the state of Massachusetts are NOT licensed and legally cannot collect a dime) Is this debt collector the only collector who own’s the debt; or is this debt collector one of many over the past few year to claim purchase of said debt?

In the past eight years in this business, I have seen Proof of Assignment TWICE out of thousands of cases. Of those two cases, one was dated before the consumer opened the original account… (no one said scam artists are smart)

2. So what if the debt collector never contacts the consumer? What if the consumer finds out about the collection by viewing his or her credit report?

It is ILLEGAL for debt collectors to report to the credit bureaus for a Massachusetts resident (unless the collection is being reported under the original creditor’s name). What does this mean? It means the debt collector violated the law. It means, not only should the consumer have the account removed from the report but also have the debt wiped out due to damages faced.

What damages? Adding a negative account to the bureaus can lead to a 100 point drop in FICO scores. Do you deserve a 100 point drop because you didn’t know about a collection or a delinquent debt? No. You deserved to be contacted prior to the illegal acts and given the opportunity to respond on your behalf before they made the information available to the public (to your potential employers, to your landlord, to your mortgage broker, etc).

Still want to pay the debt off? Consider this… The original creditor will not see a dime of that payoff. The debt collector paid 3 cents on the dollar for that debt. The collector will make a 97% profit simply because they make a living off of ruining credit, phone harassment and in many instances scare tactics.

We all want to pay our bills.It makes us feel good inside. But, before paying someone you don’t know ask questions. If they can prove it, if they practice their craft legally and they can give you a deal where you both win, then by all means pay the collector. Until they can prove themselves honest and worthy of your money don’t give them a penny.