Can a Storage Unit Send You to Collections?
Learn the steps from an overdue storage unit payment to a debt in collections, and how it impacts your credit.
When storage unit payments are not made, the resulting debt can indeed lead to collection efforts. Understanding the process from a missed payment to potential involvement of a debt collection agency is important for anyone renting a storage unit.
Understanding Storage Unit Agreements and Payment Defaults
Renting a self-storage unit involves signing a lease agreement, which is a legally binding contract between the tenant and the storage facility. This agreement typically outlines essential terms such as the monthly rent amount, payment due dates, and any applicable late fees. It also defines the grace period, which is the number of days after the due date before a payment is considered late and fees may be assessed.
A payment default occurs when a tenant fails to pay the rent by the specified due date, often after the grace period has expired. Storage companies typically initiate a series of actions once payments are missed, which often includes sending late notices or demand letters to the tenant’s last known address. These communications serve to inform the tenant of the overdue amount and the potential consequences of continued non-payment.
The Storage Unit Lien and Auction Process
When a tenant fails to resolve their outstanding balance, storage facilities have a legal right to place a lien on the contents of the unit. This “landlord’s lien” allows the facility to sell the tenant’s property to recover unpaid rent and fees. Enforcing this lien requires the storage company to follow state-mandated procedures, including sending formal lien notices to the tenant. These notices must be sent via certified mail to all addresses on file and include details like the amount owed, a demand for payment, and a statement that the contents will be sold if the debt remains unpaid.
After a waiting period, which varies by jurisdiction, the storage facility may advertise the sale of the unit’s contents. This public notice appears in a local newspaper or online and includes the tenant’s name, unit number, and the auction details. The auction proceeds, with the contents of the unit sold to the highest bidder. The proceeds from the sale are applied to the outstanding debt, covering rent, late fees, and auction costs. If auction proceeds exceed the amount owed, any surplus funds are returned to the tenant; if insufficient, the remaining balance is still owed by the tenant.
The Debt Collection Process
If a balance remains after the lien and auction process, or if the storage facility opts to pursue the debt without an auction, the outstanding amount may be sent to a third-party debt collection agency. A debt collection agency recovers unpaid debts for creditors by contacting debtors, negotiating payment arrangements, and potentially taking legal action.
Upon receiving a debt, collection agencies must send a debt validation notice to the consumer within five days of their initial communication. This notice, mandated by federal law, must include the amount of the debt, the name of the original creditor, and a statement of the consumer’s right to dispute the debt within 30 days. The Fair Debt Collection Practices Act (FDCPA) governs the conduct of these agencies, prohibiting abusive, unfair, or deceptive practices. This federal law dictates when and how debt collectors can contact consumers, restricting calls outside of 8:00 a.m. to 9:00 p.m. local time and banning harassment or false statements.
Navigating Debt Resolution and Credit Impact
A debt sent to collections can have a significant negative impact on a consumer’s credit report and credit score. Collection accounts typically remain on credit reports for seven years from the date of the first missed payment. The presence of a collection account can lower credit scores, though its negative effect may lessen over time.
Consumers have several options for addressing a debt once it is in collections. One approach is to pay the debt in full, which can be reported as a paid collection on the credit report, potentially lessening its impact. Another option is to negotiate a settlement for a lower amount; agencies may accept between 25% and 50% of the total debt, especially if paid in a lump sum. It is important to get any settlement agreement in writing before making a payment, ensuring it specifies how the debt will be reported.
Consumers also have the right to dispute the debt if they believe it is inaccurate or not owed. Sending a written dispute letter within 30 days of receiving the validation notice can compel the collection agency to cease collection efforts until the debt is verified. Documenting all interactions with collection agencies is advisable, including recording conversations if permitted by state law and retaining copies of all correspondence.