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In 2017 I had back surgery performed at an orthopedic specialist surgery center. During the billing process I set up auto-draft for all of the bills so that I would not have to worry about missing a payment. These included:

  • Imaging
  • Doctor Visits
  • Anesthesia
  • Physical Therapy
  • Surgery

All of these are separate accounts in the same billing department. After about 8 months I received a collection notice from an agency on behalf of the surgery center. I called the surgery center and they informed me I had set up auto-draft on everything except the Surgery itself (approx. $3,000) that was not covered by insurance. Note: It took about 4 months for insurance to pay all of their portion.

The woman was very helpful and set up auto-draft to pay the bill off in installments to the surgery center billing department, and I thought it was resolved. I continue to get letters from the collection agency wanting me to pay them. I called again and she informed me that there is nothing that can be done about the collection on my credit report despite them auto-drafting the payment every month since.

To date they still auto-draft my account and then forward that money to the collection agency.

My question:

  • Can I do anything to improve this situation?
  • Can I make a valid dispute since the original creditor is auto-drafting my checking account and forwarding the money?
  • I have never made contact or replied to the collection agency. Should I?

UPDATE: I took the advice from the answer here and contacted the collection agency. My account was not sold to an agency. The agency is under contract with the hospital to handle debts. The auto-draft is being applied every month and it shows the account is being paid. I am glad I called because some of my personal info was incorrect (address, etc.) I now have the account number and will be working with them to pay off the debt. Thank you everyone that commented for the input.

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    Who submitted the information to the credit agencies? The hospital, or the collection agency? – Acccumulation Dec 14 '18 at 16:46
  • @Acccumulation The collection agency reported to the credit agency. – Jeremy Dec 14 '18 at 17:32
  • Are you sure the collection notice was on behalf of the surgery center? Did the notice direct you to contact the surgery center? I suspect you got a collection notice from a collection agency directing you to contact the collection agency and you nevertheless contacted the surgery center. If that's what happened, that makes quite a bit of a mess. – David Schwartz Dec 15 '18 at 4:45
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Pete B.'s answer is great, but I wanted to call out a couple of other points from your question:

Can I do anything to improve this situation?

That depends on what you mean by "situation" and "improve", but the answer is mostly going to be no. The damage to your credit resulting from the debt not being serviced, and then sold to a collection agency, has already been done. The only thing you can do now is pay off the collection agency, and as Pete B. described this can be challenging and irritating.

Paying off the collection agency and getting written confirmation that you have no further debt to them, and that no portion of your debt was resold, is the only improvement you can make.

Can I make a valid dispute since the original creditor is auto-drafting my checking account and forwarding the money?

No (effectively, if not necessarily literally). The hospital sold the debt, which you cannot dispute or prevent. If you can demonstrate that the hospital has just been taking your money and not actually forwarding it to the collection agency you might be able to do something, though your debt will remain. But if the money really has gone to the agency, reversing the transactions won't improve your position with them. You owe the money to someone, and were clearly intending to pay it. That the hospital has been working as an intermediary makes the situation a bit more complex, but doesn't change anything about the fundamental issues.

I may be misunderstanding your goal, but I don't see that there is anything regarding authorizing transactions that would even maybe alter things in your favor.

I have never made contact or replied to the collection agency. Should I?

Yes. It will probably not be a very pleasant experience, but since your debt now resides with the agency the agency will be the only party that can certify that the debt is settled. That means you will need communications from them (in writing!) indicating what is still owed, what terms they may attach to your repayment schedule, any fees or other money-grabs they might try to insert, and, most importantly, verification that your payments have been received and applied to the outstanding balance.

The hospital may or may not be doing you a favor here (when I worked at a hospital, sending a bill to a collection agency meant that the hospital was done talking to you about it). But consider: if the collection agency resells the debt, they probably won't be forwarding any payments on your behalf. You now owe the agency, not the hospital, and the hospital almost certainly cannot assist you further. The hospital probably won't be as careful or diligent about documentation that would protect you as you yourself would be (whatever happens with the collection agency, the hospital has no stake in any problems that might arise).

Do get records from the hospital proving that they forwarded your payments to the agency, though.

  • Thank you for the response. I did not take into consideration the fact that the collection agency could again resell the debt. I do have months of receipts from the hospital that the amount auto-drafted has been forwarded to the collection agency, but I agree that trusting them to make the payment on my behalf is not a good idea on my part. I will reach out to them for all receipts of the payments made on the account and then reach out to the collection agency to pay the account in full. – Jeremy Dec 14 '18 at 18:28
  • When you say "in writing", does this mean actual physical documents with certifications/signatures, or would email suffice? – Coburn Dec 14 '18 at 19:39
  • @Coburn My intended meaning is "something which will hold up, legally, as evidence that the collector considered the debt to be satisfied". I am not a lawyer, so I can't give precise information on what would suffice. An email would probably be OK, provided that it came from someone at the collection agency that is able to make such a statement. But a physical letter, along with the postmarked envelope it was sent in, seems like it would be still more reliable. But any evidence of what they said will be better than none. – Upper_Case Dec 14 '18 at 20:04
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Okay you are dealing with a collection agency, and they are (generally speaking) pretty bad with things like lying, cheating, and stealing. This is what I would do if I was in your situation:

Stop the Auto-Draft This is pretty important, because the auto-draft will probably be for the rest of your life if the collection agency can get away with it. They may also take out an amount far greater than what you agreed to. Never, ever, ever give a collection agency access to your checking account. This should be a very high priority in your life.

So go to your bank and ask them what needs to happen to make this stop forever. That may mean opening a new account so you have a different account number. Whatever.

Then follow the typical rules when dealing with a collection agency Don't pay on the accounts, instead save up enough money to pay the account off in full. I am assuming this is 5 different accounts. Say Imaging is 200. I would offer them 110 today, to settle it in full. Make sure that you get it in writing, and that you either use a cashiers check, money order, or disposable debit card. If you do go the disposable route, after it is used never use it again. Of course you have to have the 110 to accomplish this.

Sure your credit will be dinged, but these have already been sent to collections so it is already dinged. Once they are all paid in full and they come off your credit report, your score will increase. This is just a speed bump in life, you will recover.

Keep in mind you may have some work ahead of you to clear your credit. You might have to mail in the "paid in full" letters several times in order to get the items cleared. A friend of mine had this deal, but then the original collection agency sold the account to another collection agency. Both agencies wanted payment! By the time she found out about it she had already paid the first and for about 2 years she fought with the second company, but eventually prevailed.

Keep in mind this will be difficult, but it is worth it.

  • 2
    Thank you for the answer. There are a couple of clarifications. The auto-draft is not set up with the collection agency. I have never spoken to them. The auto-draft is set up with the hospital that I owe the debt to. Also, all of the hospital accounts have been paid in full except the surgery. This is the one that was missed and auto-draft was set up later. After paying the hospital for a couple months I got the notification I had a collection on my report from a collection agency. – Jeremy Dec 14 '18 at 17:33
  • In short, I am not dealing with the collection agency at this time. Only the hospital who is forwarding my payments to the collector. – Jeremy Dec 14 '18 at 17:36
  • Also, all of the hospital accounts were paid in full to the hospital except for the surgery bill. I have not had any contact with the credit agency and have only worked with the hospital to pay the bill. The hospital is who is auto-drafting my account and then sending that money to the collection agency. – Jeremy Dec 14 '18 at 17:45
  • @Jeremy I don't think that this is as much of a distinction as you imagine. The hospital has no real role in the process any more, and they cannot (or are nearly guaranteed to choose not to) do anything beyond forwarding the payments, if they're even reliably doing that (a risky assumption). You are dealing with the collection agency, and doing so indirectly is probably not to your benefit. The hospital has sold the debt, and no longer has a role in the process-- you no longer owe them any money. Are you getting records from the hospital showing that they are making the payments? – Upper_Case Dec 14 '18 at 18:07
  • @Upper_Case I am getting a receipt every month saying my balance is $0.00 and then in pen they write the amount owed to collection. This is why I asked these questions in my post. Is it better for me to continue working with the hospital, discontinue my auto-draft to the hospital and work with the collection agency, or dispute the collection since I have proof I have been making payments to the hospital before they sold the debt to collection? – Jeremy Dec 14 '18 at 18:21
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The answer by Upper_Case is wrong in many aspects. First, you owe money to the party you agreed to owe money to. They can sell the right to collect the money to another party, but you don't owe that party money. If you give what you owe to the original party, then you don't owe it to the collection agency.

Second, you can, at the very least, require that the credit reporting agency include in their file your explanation of the debt, if not have it removed entirely. I was able to find that the entity reporting the debt must inform you in writing within 30 days, at it looks like that didn't happen [623 7] (https://www.consumer.ftc.gov/sites/default/files/articles/pdf/pdf-0111-fair-credit-reporting-act.pdf). I wasn't able to find anything that says that an entity can't report a debt after making no effort to inform the debtor of the debt, but that seems like common sense.

Third, you shouldn't pay and then get confirmation. You should not give them any money until you have an agreement in writing of how much you need to pay and that they will rescind their report once it's paid.

  • I always appreciate correction, but the first paragraph doesn't match my professional experience. I may have misunderstood the application of the policy there, though. Do you have a reference for the initial point regarding the ability of a creditor to sell the debt? If it's a legal issue that varies by jurisdiction (and it would be too demanding to get answers for every region) I'd also be interested in a published, high-level description by a relevant expert. – Upper_Case Dec 15 '18 at 0:53

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