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I live in California, and I had an ER visit in November 2010.

  • I originally owed ~$800. I've been contacted by a collection agency, and offered a settlement of ~$400
  • I have verified with the original creditor (the hospital) that it is legitimate.
  • Would accepting the settlement of $400 damage my credit any further?
  • Would paying the full amount of $800 help me in any way? I'm buying a car very soon and although I have a co-signer with excellent credit, I would rather do the least damage possible to my credit rating.
  • From this answer to a similar question it looks like it might be wise to check to make sure that the loan hasn't been sold--and if not, try to pay the hospital instead.
  • Lastly, I see a lot of mentioning to never pay a collector with a credit card or personal check. Whoops, already did with a couple of other agencies. What would you suggest for a payment method?

Thank you so much for any advice!

--

Update: So, I've asked the collector some more questions.

What other payment methods can you accept besides card or check?

Western Union

Has this delinquent account been reported to a credit bureau? If so, can I have it in writing that it will be deleted from my credit report upon receipt of the payment in full?

We do not deal with credit bureaus, we cannot give you any sort of promise like that. We are simply collecting for our client

Who's your client? What's their phone number?

FFIFH LLC. They will not speak with you until the debt has been payed. You must speak with us.

And yet, you cannot provide me with any assurance in how this will be reported to credit bureaus?

No.

Did your company purchase the debt?

No, our client did.

All the while, they are extremely rude and urgent. The more I talk to them, the more scammy and contemptible they get.

So they are collecting for their client, who purchased the debt from the original creditor (the hospital). I'll be checking with the hospital to make sure that the debt was sold, and to whom. Searching for "FFIFH LLC." yields no results.

So, do I pay via Western Union? Or another way? Since they are being particularly difficult about it, what steps can I take to help ensure a minimal impact on my credit score/report? Thanks!

  • 2
    For the sake of your relationship with the co-signer, tell them thanks but no thanks. – Nicole Apr 8 '12 at 16:44
  • I use cashiers checks for debt payments. The cost of the cashiers check and the certified/return receipt letter is not negligible, but it avoids giving the creditor information they could misuse. – ChuckCottrill Dec 19 '13 at 17:26
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A settlement would negatively affect your credit, because you didn't pay the bill in full. But, a settled debt looks better than an unpaid debt, so either way should help you somewhat. If you have the $800, you should pay the full amount, both for the improvement on the credit score, and because you owe the money.

The problem with paying by credit card or check is that it gives the creditor access to an account that they could hit again. If they took the $400 settlement, and came back later and took another $400, you'd really have no recourse, because you really did owe the full $800. It's better to pay via a bank draft for this reason.

I know this isn't part of your question, but I feel compelled to mention it anyway. I'd really recommend waiting on the car purchase until you can either pay cash for it, or at least purchase it without a co-signer. If anything happens in your life situation that makes you unable to pay for the car, it will seriously damage your relationship with the co-signer when they are forced to pay the bill. In order to get there, you might need to scale back your expectations on how much car you can afford, but it'll be worth it in the long run. Start saving money and building up some margin in your life, and later you'll be able to afford the kind of car you really want.

  • Thanks for the advice, Randy. I am certainly saving up for a very sizable down-payment. Once all my debts are resolved this month I should be able to put away at least $1k a month :) – Kevin C. Apr 9 '12 at 22:43
  • +1 for multiple nuggets of good advice: pay what you owe, pay cash. – pboin Apr 17 '12 at 17:23
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One more thing to add. If you do decide to pay less than the full $800 to settle the debt you must insist on a letter from the original debt-holder certifying that the debt has been paid in full. Otherwise there is a good chance that another collection agency will call you later for the other $400 with no memory of the arrangement and leaving you with no recourse, but to pay the rest of it.

Also, you can use this letter with the collection agency to help get it removed (at least as an outstanding debt) from your report. It isn't a priority for the collection agency to go fix it on your credit report.

In case you are interested in the mechanics of what is going on and why they are willing to cut your debt in half. The debt collector most likely bought that $800 debt (account/receivable) from the hospital at a heavy discount (possibly as low as $8 depending on how uncollectable the hospital considered it. Almost anything that collection agency gets out of you is mostly profit.

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    Debt collectors buy debt in bulk, and some of that debt is uncollectible (bankruptcy, statute of limitations, incomplete records, unable to pay, cannot find debtor, death). And they have overhead costs for collections (rent, phones, computers, mail, salaries, bonuses, training, etc). They may buy the debt for as little as 5-7%, but they will negotiate at 60% or 50%. They will negotiate hard, but are willing to settle for 10-25%, if they believe you can only pay that much. Often they will pull your credit report to check whether you have other payment issues. – ChuckCottrill Dec 19 '13 at 17:04
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Responding to your update...

Selling of debts is pretty typical when the original creditor doesn't think they're going to get paid. The debt buyer typically buys a bunch of debts for very cheap and then tries to collect on them. If this story is true, then they probably paid a lot less than 50% of the original amount owed.

Regarding what they report to the credit bureau, they should not delete the entry. The only way an entry can be deleted is due to an inaccuracy. If you really owe the debt, and haven't paid on it in a while, it will show as being late, and possibly charged off by the original creditor. If you pay the full amount, it should (eventually) show up as paid in full. If you agree to the settlement, it should show as settled. Unless it has been misreported in some way, you cannot legally have it removed from your credit report.

  • Thank you for the further clarification, Randy. I was seeing all this advice about "demand this-and-that in writing before payment," I see now that I misunderstood. So if I intend to pay it off in full, then I really don't need to demand any conditions prior to payment, do I? – Kevin C. Apr 11 '12 at 3:59
  • Another question, is paying via Western Union fine and safe? They said that I would be able to immediately print out a receipt when the payment is accepted. – Kevin C. Apr 11 '12 at 4:01
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    If you pay in full, it still wouldn't hurt to get something in writing from them. If the debt's been sold once, it might be sold again, and it would be good to have proof that it's been paid. I have no advice about Western Union. I've never used them or talked with anyone who has, sorry. – Randy Coulman Apr 11 '12 at 5:58
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A side note to your question:

If you have insurance, it very well could be that you owe absolutely nothing on that medical bill. Most hospitals/care providers sign agreements with insurance companies on how much they will be compensated for specific procedures. They are then supposed to write off any difference between the usual bill and what they got paid. They are not supposed to send a bill to the patient requesting payment for the difference. However, what they are supposed to do and what they do are usually very different things. They usually do send a bill to the patient, knowing that they aren't supposed to, because they know that a sizeable enough proportion of the people will pay the bill even though they aren't required.

If you do have insurance, I recommend that you call the insurance company and ask them how much you owe, not the hospital.

  • doesnt that depend on whether you have HSA type of insurance, or huge co-pay for ER? – Kalpesh Soni Jun 13 '17 at 4:35

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