Can a debt collector use my money for a bill I told them is wrong?

The situation

I live in Ohio and I am having a really hard time with a collection agency called Apex Recovery. Back in early January, I realized I had two different old medical bills being sent to me by them. One is for a $150 charge from a dentist visit last year that I am certain is a mistake because I never went to that office. The other is a $300 bill for a lab test that I actually owe. I sent them a formal letter via certified mail on February 10th explicitly stating that I am disputing the $150 dentist bill and that I only want my money applied to the $300 lab bill. However, I just sent them a $300 payment via my online portal yesterday, February 25th, specifically marking it for the lab bill. When I checked my account online this morning, they applied the entire $300 to the disputed $150 dentist bill first, and now they are claiming I still owe $150 for the lab test. I already called their customer service line twice to try and fix this, but the representative just told me that their system automatically applies payments to the oldest debt first regardless of what I say. Can they legally ignore my instructions and use my payment to cover a bill I told them is incorrect?

Detailed Analysis

Based on the facts you provided, Apex Recovery appears to be violating federal law. You have two separate debts: a $150 disputed dentist bill and a $300 undisputed lab bill. Because you sent a formal letter via certified mail on February 10th, you officially notified them that the $150 charge is a dispute (a disagreement over whether the debt is valid or the amount is correct).

Under the Consumer Credit Protection Act, there are strict rules regarding how collectors handle money when multiple debts are involved. The law states that "if any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer’s directions"^[1]. This means that because you explicitly marked your $300 payment for the lab bill and told them in writing not to apply money to the $150 dentist bill, they were legally required to honor those instructions.

Their claim that their system "automatically applies payments to the oldest debt first" does not excuse them from this federal requirement. By applying your $300 to the disputed $150 bill instead of the $300 lab bill you specified, they have failed to follow your directions^[1].

Additionally, because you have formally disputed the $150 bill, they must follow specific procedures regarding that amount. They cannot simply ignore your dispute and treat it as a valid debt that you are refusing to pay. Please note that state laws in Ohio may provide additional protections or specific procedures for handling debt disputes.

Statutory Citations

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