Consumer Protection

What You Should Expect If Your Debt Goes to Collection

By Amy Loftsgordon, Attorney
If a creditor sends one of your debts to a collection agency, you should find out how these agencies operate—and learn your legal rights—so you know what’s in store for you and what legal protections you have.

After you fall behind in payments for an unsecured debt—like credit card, department store, or medical debt—the creditor might send the debt to a collection agency. Creditors hire these third-party companies to hound you for the money you owe.

If you find yourself in this situation, you should learn what actions the collection agency will likely take, as well as what kind of acts are illegal, so you know what to expect and how to protect yourself. (Learn how creditors can collect debts when debtors don't pay.)

When a Debt Typically Goes to Collection

After you miss a payment—or multiple payments—for a debt, the creditor will usually try to contact you by phone and with letters to ask you to get caught up. If you ignore these communications, you don’t work out an agreement to get current or settle your debt, or you agree to a repayment schedule but don’t make the payments, the creditor will probably send your debt to a collection agency or it will sell the debt to a debt buyer.

Debts that creditors often send to collection agencies include credit card, telephone, utilities, car, government, and medical debts. Typically, a creditor will send an overdue debt to collection around three to six months after you default on the payments.

After the Debt Goes to Collection: What You Should Expect

Once you understand a little bit about how collection agencies work, you’ll be better equipped to respond after an agency contacts you so that you can work out a payment plan or otherwise settle the matter.

Assigned Debt vs. Purchased Debt

The creditor may assign or sell your overdue debt to the collection agency.

Assigned debt. With an assigned debt, the original creditor still owns the debt, but sends it to a debt collection agency with a contract to collect. Because the creditor merely assigns the debt to a collection agency, but still has ownership, the collection agency takes its cues from the creditor. This means that, in most cases, the collection agency can’t sue you without getting authorization from the original creditor. Also, if the original creditor insists that the agency collect 100% of the debt—no less—then the agency won’t be able to take a settlement for a lesser amount without getting the original creditor’s approval.

Purchased debt. In some cases, the original creditor sells the debt to the collection agency. This kind of debt is called “purchased debt.” If the collection agency bought the overdue debt from the creditor, the agency will collect the debt for itself and can make deals without getting authorization from the original creditor.

How Quickly a Collection Agency Will Contact You

You should plan on getting a call from the collection agency very soon after it acquires your debt from the creditor. Professional debt collectors know that the longer a debt goes unpaid, the less likely they are to collect.

Debt Collectors Are Persistent

Collection agents get paid based on their results. If a collection agency thinks you’re likely to pay up, the agency will move full speed ahead trying to get money from you. Individual collectors are sometimes stressed-out, rude, and not especially concerned about following the law. (Learn more about what to expect in debt collection.)

While being in debt is not against the law, a debt collector’s tactics might be. If you think a collection agency is using questionable methods to try to get you to pay up, you should familiarize yourself with the Fair Debt Collection Practices Act, a law that can protect you.

The Fair Debt Collection Practices Act

The federal Fair Debt Collection Practices Act (FDCPA) protects consumers from debt collectors. This law includes specific requirements debt collectors have to follow, prohibits debt collectors from engaging in many kinds of activities, and allows consumers to sue collectors for violations of the act. (15 U.S.C. §§ 1692 and following). Some states have similar laws and some provide even more protection from unscrupulous debt collectors.

Violations of the FDCPA are not uncommon, but if you know your rights, you won’t be intimidated by a debt collector’s illegal tactics. Also, you might even be able to use the debt collector’s violations of the law to your benefit in negotiations.

Illegal Debt Collection Practices Under the FDCPA

Here are just a few of the protections that the FDCPA provides to debtors.

  • A debt collector can't contact you at an unusual or inconvenient time or place. Calls before 8 a.m. and after 9 p.m. are presumed to be inconvenient. (But if you work nights and sleep during the day, a call at 1 p.m. might also be inappropriate.)
  • A collection agency can’t engage in conduct meant to harass, oppress, or abuse.
  • A collection agency generally can't contact third parties about your debt, subject to a few exceptions.
  • A collection agency can’t engage in unfair or unconscionable means to collect a debt.
  • A collection agency can’t use false, deceptive, or misleading representations to get you to pay a debt.

Getting Help

If you think a debt collector is violating the FDCPA in its communications with you, you can file a lawsuit against the collector for damages. The law surrounding debt collection is complicated, and the facts of each case are unique. For detailed, specific information about your situation and protections under the FDCPA, consider contacting a consumer law or debt settlement attorney.

You can also file a complaint against the collector with the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), or your state’s consumer protection office. (Read more about finding legal help for consumer issues.)

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