Collection Notice: 23 Steps to Responding

Collection Notice Received. What to Do When You Get a Collection Letter or Phone Call

“I just got a collection letter. What do I do now?”

It’s a question we credit counselors hear with regularity, often from a caller who is feeling a bit frantic at the prospect of having an account in collections.

What to do if you are unsure about owing the debt or think it might be a fraud:

  • Do not pay the debt collection agency by phone and NEVER pay with gift cards

  • Contact the original creditors to discuss the legitimacy and accuracy of the debt

What to do once you are positive the debt is yours, is legitimate and is accurate:

  • Immediately pay the debt to the collection agency

  • Immediately contact the original creditor directly to pay the debt in full

  • Immediately contact the original creditor to set up monthly payments

What to do once you have established that the debt collector is a fraud:

  • NEVER reach back out to a “collector” you know is fraudulent

  • Report the fraud to your state regulators and the Better Business Bureau

  • Mark the phone number as spam, and ignore it in the future

What to do once you have established that the debt is inaccurate and not owed:

  • Dispute the collection account on your credit report

  • Dispute the debt with the original creditor and ask them to remove the account from collections

  • If collection activity continues, you may need to consider legal counsel

The truth is, most Americans will be contacted by a collection agency at some time in their adult lives, thanks in no small part to the disheveled and confusing medical billing systems around the country, a bit more so even than the fact that we are carrying record levels of both student loan and credit card debts. Still, medical debts are the most common types of debts that end up in collections.

Past due or delinquent notices can be scary, however, the way you initially respond can make a huge difference.

Past due or delinquent notices can be scary, however, the way you initially respond can make a huge difference.


Always Consider the Possibility of Fraud

Right up front, let’s make one thing clear. NEVER respond to a collection notice delivered by email. Can we all agree, please, that any such email is 100% spam and can only lead to the fraudulent loss of your personal information and money?

You would do well to be suspicious of any telephone calls from collection agencies, even when you feel you actually owe the debt. It is not impossible for a fraudster to get ahold of your credit information and call you about a debt that seems likely to go to collections soon (or already has).

You should even beware of collection notices that arrive by mail, particularly if they request payment be made online or with gift cards.

If you have had the unfortunate luck of spending a day or, worse, a night in the hospital, you know that over the next month or two, you might receive multiple bills from various offices, ranging from the hospital to a lab in the same complex, from the hospital’s radiology department to a medical equipment company that sent you home with one of its products. If your stay included surgery, then expect another few bills from the anesthesiologist, the surgical group, and another doctor or two who poked his or her head into the Operating Room or the recovery room while you were unconscious.

In some cases, the hospital might be able to consolidate all these bills into one. In other cases, you will have to pay them each individually. Unfortunately, many consumers/patients miss a bill here or there, usually on accident, and soon enough get a phone call from a bill collector.

Other common types of debts that end up in collections are long overdue credit card payments and balances, student loan debts and old cell phone and utility bills.

Regardless of the background of the debt, here are the steps you should follow when a debt collector contacts you.

Consider the debt collections quadrants below to determine where your collection experience falls. Then, read the sections below for specific steps to take and cautions to consider.

Dealing with debt collection calls can be stressful. Use the chart above as a guideline for ideas on how to deal with your particular situation.

Dealing with debt collection calls can be stressful. Use the chart above as a guideline for ideas on how to deal with your particular situation.


If you receive a collection phone call or receive a collection notice in the mail, there are two immediate questions you should ask yourself and then answer:

  1. Do I owe this debt?

  2. Can I afford to pay this debt?

Your first steps hinge entirely on the answers you offer to these two questions.

Do I Owe This Debt? 

Your first step should be to ask yourself, “Do I recognize this debt?” The two possible answers to this question are represented on the horizontal axis above, with positive answers in the right column and negative answers in the left. To come to a reliable answer, pose the following questions to the debt collector preferably by phone, then by mail:

  • What is your full name (or employer ID) and what is the name of your company?

  • What is your phone number in case we get disconnected?

  • Who originally held this debt?

  • What is the name of the person who originally incurred this debt?

  • When was this debt originally incurred?

  • What service or product was this debt originally for?

  • Would you please immediately send me confirmation by mail the detailed information about this debt?

If the debt collector cannot or will not provide an answer or response to ANY of these questions, it is likely that you are dealing with either a scam or with a collection agent so inexperienced or shady that you will want to ask for his or her manager.

Even if you feel you owe such a debt, do not give ANY information to the collection agency calling you by phone. Do not initially even acknowledge that the debt it yours until after you are convinced of two truths: you owe the debt and the collection agency is not a scam.

In the rare coincidence that a scammer has obtained your credit information and sees a collection debt on your report, he or she might try to exploit his or her good fortune in happening upon this information by trying to get you to pay a debt to him or her that you actually owe to someone else. Scammers are ruthless and unethical that way.

While a collection agency may not like it, you should take a few moments, minutes or even hours to compose yourself, collect your thoughts and grab a notepad before returning the collection call.

Even if you come to realization that the debt is valid and you owe the money, you should NEVER pay the debt collector on a first contact.

Instead, immediately contact the billing department of the original creditor as identified by the collection agency. You may need to look up their phone number or email address online. As part of this conversation, find out what the debt was for and which family member – if applicable – incurred the debt (not always clear if dealing with medical debts).

Next, establish whether the debt is still owed. If it was for a medical debt, should the insurance have paid the bill? If so, you will need to contact your insurance company.

If the debt was for an old utility or cell phone bill, contact the provider to confirm the validity of the charges. Do you have any documentation proving you do not owe the money? For example, did you note the date and name of the representative you called to disconnect the service?

For student loan debt collections, perhaps you have been on an income-based repayment plan and simply forgot to submit the required annual documentation.

Regardless, your first call after getting off the phone with the debt collector should be to the original creditor (doctor, credit card company, utility company, etc.).

If you are satisfied that you owe the debt, move on to the next section. If you are confident that the debt is either erroneous or fraudulent, continue with the following:

If you feel the debt collector is trying to defraud you of your money, report as much of the details about the phone call or letter as you can to two state government entities and one nonprofit:

  1. Let your state’s Department of Finance, Banking, Financial Institutions or Consumer Affairs know. Often, these are the government departments responsible for regulating debt collectors, and they will want to know when their citizens are being targeted by bad actors and fraudsters.

  2. Notify your state’s attorney general and provide as much detail of the call or letter as possible. Again, as your state’s elected representative charged with upholding state and federal law, your AG wants to be aware of illegal activities happening among the state citizenry.

  3. Notify your local better business bureau. Besides curating the business reputations of organizations in your area, the BBB also tracks trends in scams and fraudulent activities targeting their region. Providing details to your local BBB might just help a fellow citizen be better prepared for the moment they receive a similarly fraudulent phone call.

Finally, if the fraudster attempts to contact you again, avoid the temptation to have a heated conversation with him or her. Instead, mark the phone number as spam on your phone and ignore any other phone calls from numbers you do not recognize. It may take weeks or months, but eventually the scammers will tire of your voicemail and move on to another potential victim.

If, on the other hand, you think the collection agency is not fraudulent but just mistaken in the status or amount of the debt (more common that we care to believe), gather as much documentation as you can about the debt from your own files, bills and emails as well as from the original creditor. Before calling the agency, scan all your documentation and send to the collection agency via email or fax. Send a cover letter/email that states why you believe the account is inaccurate and refer to the documentation.

If you have no success whatsoever in connecting yourself to the debt, it is quite possible that the debt does not belong to you. Usually, you will discover this during your initial series of questions requesting details of the debt. Whether immediately or after some investigation, once you determine the debt does not belong to you, submit formal disputes with three organizations:

  1. Start with the debt collection agency first. Send a letter, either certified post or with signature request to verify its receipt, stating your case for disputing the account. Include any relevant documentation, including your full name, current and recent addresses, your date of birth and the account number in question. Do not send your full social security number. At this point in the letter, if you are absolutely sure it does not belong to you, you may also request that the agency never contact you again. By federal law, they cannot call, email, or write to you or any other person about this debt. Their only options are to ignore the debt and take the financial loss, sell it to another collection agency for even less than what they bought it for, or take you to court if they believe they have a strong enough case (unlikely if you are positive the debt is not yours). You should receive a summons in the latter case.

  2. Next, monitor your credit reports regularly for the collection account. Your full credit report (not your score) is available every twelve months for free from, and pulling your report will have no negative effect on your credit rating. You might also consider using free services such as and While these services do not provide your full credit report, they often notify you when a new account is listed on your report. If the collection account makes it onto your report, dispute the account directly through the home page of, or (whichever one lists the account). Be prepared to upload any documentation about the account that supports your case.

  3. Finally, you should also consider sending dispute information to the original creditor. Whether they had another patient or customer with a similar name or a similar social security number, mistakes can happen when humans get involved. Send them a letter or call them to apprise them of your situation. Once they realize their mistake, they might appreciate your openness so they can correct the problem and connect the account to the right person.

Now that you have taken steps to determine whether or not the account belongs to you, continue to the next section to learn what to do with collection accounts you know are your responsibility:

How Am I Going to Pay the Debt?

Assuming you have determined that the debt in collections is actually your responsibility, this question will help you determine how to proceed. If, after contacting the original creditor, you find that you still owe the debt, you have three options:

  • Pay the original creditor

    o   Pay the full balance immediately to the original creditor

    o   Set up a series of monthly payments to the original creditor to repay the entire debt

    o   Offer to pay less than the full balance due to the original creditor

  • Pay the collection agency

o   Pay the full balance due to the collection agency

o   Offer to pay less than the full balance due to the collection agency

o   Set up monthly payments to the collection agency

  • Ignore the debt collection process and hope nothing bad comes as a result

Paying the Original Creditor

When reaching out to the billing clerk or finance department at the original creditor’s office during earlier steps, if you can afford to do so, offer to pay the entire sum of the debt immediately. Since you reached out to the creditor yourself, you can generally trust that the person on the phone represents a legitimate company. If there are no additional fees, paying by phone with a debit card might be a good option (just make sure to confirm the amount and request a receipt). Otherwise, consider using the creditor’s online payment portal or send them a check/money order by mail.

Whatever method you choose, get it in place quickly. Delaying can only lead to additional fees and less willingness on the creditor’s part to work with you on flexible repayment terms.

The two most important pros of working with the original creditor include, first, being more likely to be able to set up a monthly repayment plan, and second, bringing the account back “in house” from the collection agency essentially keeps the account off your credit report and prevents it from showing up as a collection account that would negatively affect your score.

Paying the Collection Agency

If the original creditor is unable to accept payment or requests that you direct all payments to the collection agency, understanding the transaction between the two companies will help you make your next decision.

While some collection agencies work on a straight percentage basis, keeping a certain amount of moneys collected and forwarding the balance to the original creditor. Most collection agencies, however, purchase the accounts outright. It is critical to understand that they do not pay full price for an unpaid account. Instead, they typically pay the original creditor between 30% and 40% of the original balance of the account before contacting you to request the full amount. This is how they turn a profit. Because they hold the power to threaten you with a collection account on your credit report, they are more likely to collect the payment after six or twelve months than the original creditor would be.

These account purchase arrangements should also be instructive when it comes to who gets any payment you make to the collection agency. The entire payment typically goes to the collection agency, not to the original creditor. If, for example, you owe money to your dentist and the account goes to collections, the dentist already received his or her 30% to 40% payment when the collection agency purchased the account. Paying the collection agency does not mean your dentist gets any additional payment.

Consequently, knowing that the collection agency only paid 30% to 40% of the balance due for your account, you are now empowered to negotiate. If you can’t pay the original creditor, you might consider offering less to the collection agency than the full balance. If you offer them half of the balance, they would still be making a profit equal to about 10% to 20% of the original balance. If you go this route, you may also want to request (and get it in writing) that the agency not report the account to your credit, or at the very least, list it as paid in full.  Though a minority of lenders are using them, newer credit rating models ignore paid off collection accounts completely when generating your credit score.

If you are unable to afford the full payment due to the collection agency or even half, you may attempt to negotiate a monthly payment plan. Understand, however, that this is not standard procedure. Many collection agencies will return a check you send them if it is not for the full amount. The reasoning here is that if they accept the payment and then you choose not to make any further payments, they will not have much to stand on if they attempt to take you to court to get a judgment against you. The one check might look like an agreement to accept less than owed.

So, if you attempt to arrange monthly payments, put everything in writing and send it with your payment. For example, “this is the first $100 monthly payment, due by the 5th of each month, of 10 total payments that will fulfill my obligation regarding account #12345.” There is still no guarantee that this will work, but it might be worth a try. Keeping in mind that they originally paid 30% to 40% of the balance due for the account, the closer your payment can get to that 30%, especially up front, the more likely they are to accept it. Keep in mind, however, that your written agreement might be used before a judge if you cease future payments.

Ignoring the Debt

Very little good will ever come of ignoring a debt. Sure, you might be holding onto the sliver of a possibility that the lender has somehow forgotten about you or misplaced your file, but chances are quite likely that, if the creditor has not been in contact with you lately, they are just biding their time until you might be in a better situation to repay your debt.

Possible consequences of ignoring your debts include ongoing and seemingly interminable collection calls and letters, court summons, wage garnishments, a bank account levy (frozen account), and, eventually, personal bankruptcy.

If you struggle to afford payments to either the original creditor or the collection agency, consider contacting a nonprofit credit counseling agency, such as Money Fit. Credit counselors regularly work out monthly repayment terms with credit card companies, medical offices, hospitals, collection agencies, and others. Interest rates are minimal and late fees typically stop within a month or so.

Take a Breath and Gather Your Wits

Whatever you do (or don’t do), do NOT act out of fear. We humans rarely make good decisions based on our anxieties. Take a few hours or, better yet, a day or two to consider your options and which steps will be best for you to take. Get a friend’s or family member’s perspective. Call a nonprofit credit counselor for free counseling on your options. Once you are better informed about your options, you will be better positioned to make the best financial choice for you and your household.