Watch out, this little bill can have big consequences.
It’s a story we’ve heard many times.
“Trish” shared an apartment with three roommates. They all got along well and everyone split the bills equally. So when she moved out and one of her roommates took over the electric utility account that had been in her name, she figured she had nothing to worry about.
Then three years later, she received a call from a collection agency stating that she owed over $300 for an unpaid balance on the account. She quickly contacted the former roommate who had taken over handling the bill and he assured her he always paid it on time. More digging however revealed that after he moved out, another roommate took over the account, and he wasn’t nearly as responsible. As a result, there were now unpaid bills that she was being told were her responsibility.
Thinking back, Trish thought she had switched the account out of her name, but she wasn’t positive, and wasn’t sure she could find records to prove it.
She’s devastated; not only is she facing a potentially expensive bill for services she never used, but also, her otherwise previously perfect credit history now lists a collection account that has caused her credit scores to drop dramatically.
Over the years, we’ve heard hundreds of variations on this story regarding:
- Utility bills (electric, water, gas, etc)
- Cell phones
- Landline telephones
- Cable or satellite television
- Internet service
Sometimes these situations involved roommates where one of them had an account in his or her name, did not make sure that the account was transferred into the name of one of the other roommates before moving, and the former roommates failed to pay the bills on the account or didn’t pay them on time. Other situations often involved family members or ex-spouses while still others involved bills for balances remaining on an account even though the account holder thought he or she had paid the final balance.
The common thread is that the consumer responsible for the bill didn’t realize that there was still an open account in his or her name or that there was an outstanding balance on an account he or she had closed, the account did not get paid, and the money owed wound up in collections.
How to protect yourself
It can be very difficult to resolve these kinds of situations after the fact. To protect yourself in the future, therefore, it’s a good idea to take the following steps when you are moving out of your residence or closing an account…
Get it in writing
Get written confirmation that you have closed an account and keep the confirmation in a place where you will be able to find it, even after you move. One option may be to email the confirmation to yourself as an attachment with the subject line: “Final bill for XXX account 2016” and then to save that email. That way you can search for it later. (Of course that only works if you keep that email address permanently!)
Make a note on your calendar or set an alert on your cell phone to follow up in a month after you’ve closed the account to make sure that no outstanding balance remains on it and that your account is still closed. If you have online access to your account, you should be able to confirm it that way. If not, you can call the service provider. If you do the latter, ask for written confirmation that the account is closed and has a zero balance.
Monitor your credit reports
Sometimes consumers don’t find out about these debts until they apply for a loan and discover a collection account on their credit report for a debt they didn’t know they owed! So at a minimum, check your credit reports with Equifax, Experian and TransUnion once a year at AnnualCreditReport.com to see if there is activity from companies you don’t recognize, or recent activity on an account that you thought you had closed or transferred out of your name.
An inquiry from a collection agency or from a utility provider with whom you no longer have an account could mean there is a company trying to locate you to collect an unpaid bill, and that may be something you need to investigate.
Also, you may find that a debt in your name has been sent to collections. Again you may not have closed the account and the person who assumed responsibility for it may have stopped paying on it or you may have closed an account without realizing that there was an unpaid balance due on it.
Here is what to do if like Trish, you are caught off guard by a call from a debt collector about a debt you did not realize you owed, or if after reviewing your credit reports you find that a debt in your name that you didn’t think you were responsible for has been sent to collections.
File a dispute
First, you can request that the collection agency validate (or confirm) the debt; the debt. This is your right under the Fair Debt Collection Practices Act. Put your request in writing and send your letter to the debt collector via certified mail with a return receipt requested (or with proof of delivery) so that you know it was received. Trish for example, could simply state in her letter that she had moved and that the account was no longer in her name. If she could provide proof that she was living elsewhere at the time that the unpaid debt was incurred (a copy of another utility bill, for example), that would help bolster her case, but proof is not required to dispute a debt.
Next, you may want to check your credit reports (see above) to find out if the collection agency has reported the debt on your credit reports. If it has, and you don’t believe it’s accurate, you can file a dispute with the credit reporting agency, which is then required by law to contact the collection agency to verify the debt. If it cannot verify it, it must stop reporting it.
Be sure to file a dispute with each credit reporting agency that is reporting the information because they don’t share information with each other. Also, keep in mind that although you can file your dispute online, if you do so, you may be giving up your right to pursue your dispute in court if necessary. Therefore, it’s best to put your dispute in writing.
If all else fails, negotiate
If the company or collection agency verifies that you owe the debt you’ve disputed, it may agree not to continue reporting the debt if you pay the debt in full right away or if the company or collection agency is willing accept a smaller amount than what you owe as payment in full. Although they are not obligated to agree to either option, they may be open to one or the other depending on the circumstances. We discuss techniques for negotiating with collectors in our free ebook Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.
This post courtesy of Dollar Stretcher.