Library Books and Credit Scores

With the current economic condition many sectors are being increasingly affected with many experiencing negative revenue for the first time in many years. This is also true with regard to many municipal governments who have recently stepped up efforts in collection many of their receivables. These receivables come in the form of unpaid parking tickets, dog catcher fines and even library fines etc. The problem is that most people don’t know that if these items are not paid they would have to be reported to the credit bureaus and your credit report will be negatively affected.

The problem is that even though the fines may be small the negative record is the same as if the fines were worth a lot more. Unfortunately most municipal councils have realized that they have fines that amount to many of millions of dollars that can easily be turned into cash if they sold the debt to collection agencies. Private collection agencies are re-known for threatening people with a negative record which they may or may not choose to send to the credit bureaus. The problem is that some collection agencies will tag on an extra 20% to the collectables. It may sound unlawful but it is totally legal. The collection agencies also have the right to report any debt that they might not be able to collect which can have a massive impact on your credit scores. That is where the problem starts. Imagine your overdue book causing you to be rejected for a loan in the future. Not a very nice outcome is it?

The number of municipal councils who have taken to sell their debt balance to private collection agencies have increased dramatically and as such the number of people that have been driven to a bad credit rating by these firms have increased dramatically too. The trend is only increasing as the government sector has realized that if the collection is turned over to these collection agencies that there will no longer be any risk to the collection agencies, rather they see as much as 80-90% of their receivables paid.

While not all municipalities have taken up this private collection agency route we estimate that it will not be long before all municipalities take up this path. Previously it might have been borderline prudent to put off payments for municipal licenses or fines to keep cash flow fresh, doing so now is an extremely dangerous proposition especially if you want to keep a good credit record. 

We strongly recommend that consumers be acutely aware of the situation especially when it comes to municipal fines or yearly license charges. It is indeed a very bad thing if your debt is sold to a collection agency. The first thing that happens is that you will be charged quite a bit more to cover “administrative charges” associated with the collection. The collection agencies will also give you very little notice regarding re-payment periods etc and are quite vicious chasing up what you owe them. Expect lots of harrassment letters and phone calls.

Collection agencies are also known to report erroneously to the credit bureaus either intentionally or not. The problem is that getting items removed from your credit report is a long and arduous process. It can take even years to get a single error corrected, even then there is no guarantee that it will happen. You should try your best to make sure no mistakes are made in the first place or your ability to get financing or loans will be deminished for no good reason.

The best defense now is to be aware of what you owe your municipal counsels so that you don't get your credit score reduced buy these seemingly small items. There is nothing worst than to have your credit score ruined by your kid’s lost library book or your dog’s expired license. Its hardly worth it is it?