Paid in Full -- Now What?

A lot of time is spent advising consumers how to stay out of debt, or deal with collection agencies being too aggressive, but very little time is spent advising them how to handle an account after it has been paid.

You might think that an account, once paid, is not an issue, and you would be right … most of the time.

Reassignment of Files

Most often, larger creditors will move accounts from one agency to another after a period of time – this is called reassignment of an account, or a second placement collection file. Some larger creditors may even have a third placement or fourth placement process.

When a reassignment process happens, sometimes information is lost from one agency to the next – wrong numbers, deceased consumers, or even in some cases, paid or settled accounts. This isn’t a malicious act, but something can can happen because the first collection agency didn’t properly report the file, or the creditor has not screened accounts before reassigning them. The consumer doesn’t see this internal process, and can understandably be surprised to receive a call on an account they thought was resolved.

Consumer, Protect Thyself

If you pay an account, whether it is to a creditor, a collection agency, or even a law firm, you should always, always, always keep a record of that payment. And you should keep it, like any other financial transaction for a period of seven years.

It’s all well and good to tell a collection agency that you have already paid an account, but showing proof will stop the calls and close the file.


Proof of Payment From Collections

A cancelled cheque or statement showing a zero balance is certainly helpful, but often a collection agency will collect funds from a consumer by EFT, direct deposit to a trust account, or a money order – often linking this payment to a collection account can be an issue. Furthermore, if you have negotiated a settlement (as we discussed in this article: http://receivableaccounts.blogspot.ca/2012/05/debt-settlement.html) it is very important to have some sort of document releasing you from the debt.

Below is a sample letter showing a release of a consumer. Notice the key phrases “released from any obligation” and the assurance it will not be reported to the credit bureau are clearly laid out in the letter. Most agencies have a form letter to this effect, and you should ask for it on an account that may be in question.

Follow Up

Lastly, you want to follow up on your account and ensure it hasn’t been reported to the credit bureau, by pulling a copy of your credit report – something you should do at least once a year, from both Equifax and Trans Union. To be on the safe side, wait at least 30 days from the date of payment to ensure at least one reporting cycle has passed, and pull a copy of your credit rating for free. You can find instructions on how to do that here:

http://www.equifax.com/ecm/canada/EFXCreditReportRequestForm.pdf
http://www.transunion.ca/ca/personal/creditreport/consumerdisclosure_en.page


Conclusion

Every consumer should keep up to date on what is outstanding, and what is paid, and be prepared with organized personal records. In business, creditors can expect proof of claims that an account is paid in full or settled, and part of the responsibility to show this proof rests with the consumer.

If you have any questions about release letters, conditional settlement offers, or consumer/creditor/agency obligations about financial records and proof of payment, I am happy to discuss this with you by phoning my office directly at 226-946-1730.

Blair DeMarco-Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
226-946-1730
bwettlaufer@kingstondc.com