What Can a Debt Collection Agency Do?

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In this article


  • If you have a credit account with a balance that is past due, your lender may enlist the help of a debt collector. If this happens, it’s important to understand what debt collectors can do to recover a debt.
  • Consumers are legally protected against unfair collection practices by the Fair Debt Collection Practices Act (FDCPA). You can report problems to the Federal Trade Commission via ftc.gov.
  • Late payments can remain on your credit reports for up to seven years from the original delinquency date. However, if you pay off the debt as soon as you can, the debt collector may update your credit reports to show the collection account now has a zero balance.

What happens when you are sent to a collections agency?

If you have a credit account with a balance that becomes past due, your lender may enlist the help of a collection agency. Collection agencies are companies that purchase consumer debt and work to recover unpaid balances.

Some lenders have special in-house departments dedicated to debt collection, while others hire third parties to handle collections on their behalf. Some lenders may even hire legal representation to sue borrowers to recover outstanding debts. However, in all of these cases, the goal remains the same: to contact borrowers and secure the outstanding balance on any past-due accounts.

What happens when your debt is sent to a collection agency?

If your past-due debt has been purchased by a collection agency, they will first notify you either by phone or in writing. By law, you must receive written notice, also known as a debt validation letter, within five days of the collector's first attempt to contact you. This notice must include the amount you owe, the name of the original creditor and a statement of your right to dispute the debt.

It's important to keep this letter throughout the debt collection process, as it can be an important tool should you need to dispute the debt for any reason. After you have been contacted by the debt collector, it's time to take steps to repay what you owe.

Although the collection agency may not report the unpaid debt to the three nationwide consumer reporting agencies—Equifax, TransUnion and Experian — it is a good idea to check your credit reports. This is one way to know whether your credit is being impacted by the past-due debt.

What can a debt collection agency do?

The prospect of strangers knocking on your door and asking for money that you may not be able to pay can be scary, especially if you're unsure of your rights. What can collection agencies do to collect payment on a debt? What rights do you have if you find yourself unable to pay? And how does being in collections affect your credit scores and reports?

Can debt collectors call you at work? Debt collectors are not legally allowed to contact you at a time or place that is unusual or that they know is inconvenient to you. Thus, if you tell a collection agency you are not allowed to receive personal calls at work, they cannot call you there. Collectors are also prohibited from calling you before 8 a.m. and after 9 p.m.

Can debt collectors call your family? A debt collector may only contact other people, such as family members or friends, to gain information about how to locate you. This might include where you live, your phone number and where you work. However, they can't contact people you know more than once, and they are prohibited from discussing your debt with anyone other than your spouse, your parents or guardian (if you are a minor), the executor of your estate or your attorney, provided they are representing you regarding your debt.

Can a collection agency sue you and take you to court? Yes, debt collectors can take you to court to recover a past-due debt. If you are sued, it's important to respond right away, either personally or via a lawyer.

If you need financial assistance to secure legal representation, you can use the Legal Services Corporation's search tool or find a pro bono legal aid program using the American Bar Association's Free Legal Help directory.

Can debt collectors see your bank account balance or garnish your wages? Collection agencies can access your bank account, but only after a court judgment. A judgment, which typically follows a lawsuit, may permit a bank account or wage garnishment, meaning the collector can take money directly out of your account or from your wages to pay off your debt.

However, to make sure you have money left to live on, state and federal laws have placed limits on bank accounts and wage garnishments. These limits, also called exemptions, vary by state so be sure to look into the specific guidelines where you live and consider enlisting the help of an attorney.

There are also additional garnishment protections if you receive federal benefits, such as from the Social Security Administration or the Department of Veterans Affairs, that are directly deposited into your bank account. If this is the case for you and a collector tries to garnish funds in your account, your bank or credit union must protect two months' worth of the benefits and let you use that money.

What protections do I have against unfair debt collection?

Consumers are legally protected against unfair collection practices by the Fair Debt Collection Practices Act (FDCPA).

The FDCPA prohibits debt collectors from using abusive, unfair or deceptive practices to collect debts from you. The law applies to mortgages, credit cards, medical debts and other debts for personal, family or household purposes. If you suspect a collection agency is pursuing you through unfair means, report your concerns to the Federal Trade Commission at ftc.gov or the Consumer Financial Protection Bureau at consumerfinance.gov.

How will collections affect my credit scores and reports?

In most credit scoring models, your payment history accounts for the largest portion of your credit scores. That means late payments — especially those that end up in collections — will likely have a negative effect.

Debt that is in collection may remain on file for up to 7 years from the original delinquency date (or date of first delinquency) or the date of the first missed payment due to the original creditor.

When the collection debt is paid off, the debt collector must update the information reported to reflect that the collection is paid off. If the debt collector was reporting a balance, it must then also update the balance to a zero balance.

For a free monthly VantageScore 3.0 credit score and Equifax credit report, create a myEquifax account and click "Get my free credit score" on your myEquifax dashboard to enroll in Equifax Core Credit™. A VantageScore is one of many different types of credit scores. You can also get free credit reports annually from the three nationwide consumer reporting agencies at AnnualCreditReport.com.

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