Collection agency reports can have a devastating effect on credit scores. The Fair Credit Reporting Act notes that these reports can legally remain a part of a consumer's credit record for seven years. Individuals wishing to remove collection accounts early sometimes offer to pay off the debt if the collection agency will voluntarily remove its notation from their credit files. This process is known as a "pay for delete." Each collection agency has its own guidelines regarding the process.
Any company that can make reports to the credit bureaus also reserves the right to amend its reports. This is crucial because, in the event an information provider makes an error, it must have the ability to correct its error. Unfortunately, it is not uncommon for debt collection agents to incorrectly inform consumers that modifying their credit reports is either impossible or even illegal. In reality, no law prohibits collection agencies—or any other company—from deleting unfavorable reports to the credit bureaus before the federal reporting period on the account expires.
Collection agencies are typically uncooperative when faced with a pay-for-delete offer. This is because if the company make a habit of modifying consumer credit records, the credit bureaus may consider the company's reports unreliable and terminate its contract. Still, other collection agencies consider modifying reports a violation of their original reporting contract with the credit bureaus. Telling consumers that deleting their negative reports in exchange for payment is "illegal" is easier for a collection agency than merely saying "no." Consumers are more apt to accept the fact that the company is not legally allowed to delete an entry than the fact that the company does not wish to do so.
Violating the Law
While there's nothing unlawful about deleting an accurate collection report in exchange for payment, refusing to delete an inaccurate collection report is against the law. If you note a collection account on your credit report that does not belong to you, the Fair Debt Collection Practices Act allows you to force the collection agency to either validate its claim or delete the notation from your credit record. You can also dispute entries directly with the credit bureaus. Should a collection agency continue to pursue a debt that it cannot prove, you have the right to file a lawsuit against the company in either state or federal court.
Although more and more collection agencies are hesitant to approve a pay for delete agreement, there are some steps you can take to make your proposal more attractive to the company and protect yourself in the process. Offering to pay the full debt in one lump sum is more attractive to a debt collector than offering a settlement or paying the debt in installments. Asking to speak to a supervisor rather than a representative also gives you an edge since a supervisor has the power to approve your proposal on the spot and representatives often do not. Should a collection agency agree to delete its report in exchange for payment, ask for the agreement in writing before paying off the debt. This ensures that you have legal recourse in the event the company does not hold up its end of the bargain.
- Federal Trade Commission: The Fair Credit Reporting Act (Section 605/p.22)
- Bills.com: Pay for Delete
- Federal Trade Commission: The Fair Debt Collection Practices Act (Section 809/p.11-12)
- CNN: Rogue Debt Collectors—How to Fight Them
- Credit Builders Alliance: Negotiate With Collection Agencies Tip Sheet