Paying off your debts not only allows you greater financial freedom, but also provides you with a sense of personal satisfaction. Unfortunately, some former debtors find out the hard way that paying a collection agency is only half the battle. Without a receipt from the collection agency acknowledging your payment, you may find yourself still on the hook for a debt you already paid -- especially if the collection agency sells your debt to yet another debt collector.
When you pay a collection agency, any bargaining power you previously possessed disappears. The collector will have little interest in you after receiving your payment and is under no obligation to provide you with a receipt to help you prove that you satisfied the debt.
Just because the company is not obligated to give you a receipt that does not mean that it will refuse to do so. Legitimate collection agencies often provide consumers with “zero balance” statements. A zero balance statement is simply a letter noting that you paid off your collection debt.
After you pay off a collection debt, the Fair Credit Reporting Act requires that the collector change the account’s status on your credit report to “paid.” While this doesn’t improve your credit score, it demonstrates to lenders that you no longer have an outstanding collection debt that could interfere with your ability to pay off a new loan or credit card.
If the collection agency does not change the account’s status to “paid” on your credit report, you can dispute the account’s status with the credit bureaus as inaccurate by providing each bureau with a copy of your zero balance statement. If you did not receive a zero balance statement and the collection agency claims its report of an unpaid debt is correct, you will have more difficulty getting your credit report corrected. Depending on how uncooperative the collector is, you may even need to file a lawsuit against the collector to force it to correct your credit information.
Before You Pay
To ensure that you receive the receipt you need, ask that the collection agency send you a written statement agreeing to provide you with a zero balance statement after you pay off the debt. In the event the company refuses to do so, you can use the agreement as the basis for a lawsuit. Most collection agencies would far rather send a former debtor a receipt than defend themselves in court.
Proof of Payment
If you already paid off a collection account but did not receive a receipt from the company, you can still demonstrate that you paid off the debt. A copy of a collection letter from the company detailing the amount you owe, coupled with a canceled check or proof of a debit transaction, clearly shows that you paid the collection agency the amount you owed and that the company accepted the payment.