Debt Collections

A debt collection agency is a company used by a lender or creditor to recover past due funds and accounts in default. The collection agency may call the debtor's personal and work telephones, mail numerous late payment notices to the debtor, contact the debtor's family, friends, and neighbors to confirm the debtor's contact information, and appear at the debtor's front door. Third-party collection agencies are bound by the Fair Debt Collection Practices Act (FDCPA).

Below is information that may be helpful if a creditor files a lawsuit against you, but it is not a substitute for legal advice. There are other rules and laws that may apply to your situation, but these are common rules and laws that apply in civil cases.

U.S.C. means United States Code:


  • Some collection agencies negotiate settlements with consumers for less than the amount owed for difficult-to-collect debts. The debtor may have to pay the full debt all at once or may be able to make monthly payments. An account under debt collection can remain on a person's credit report for 7 years.
  • The FDCPA is federal law that applies to personal and household debts, like money owed for the purchase of a car, for medical care, student loans, and mortgages. It does not apply to debt owed for business purposes. (15 U.S.C. §§ 1692-1692p)

  • Third-party debt collectors are prohibited from engaging in unfair, deceptive, or abusive practices while collecting these debts. Under the FDCPA, third-party debt collectors:
  • may contact a person only between 8:00 a.m. and 9:00 p.m. at home or work.
  • must stop contacting the individual if requested in writing (i.e., "cease and desist letter").
  • may call family members, friends, and neighbors one time each to obtain a phone number.
  • may not harass, oppress, use profane or obscene language, or abuse an individual. 
  • may not lie when collecting debts, such as falsely implying that a crime was committed.
  • must identify themselves on the phone.
  • may mail numerous late payment notices.
  • may appear at an individual's front door. 

  • Within 5 days of contacting the consumer, the debt collector must send a written validation notice that includes:
  • how much money is owed.
  • the name of the creditor the debt is owed to.
  • notice indicating the consumer has 30 days to dispute the debt before it is assumed to be valid, and how to dispute the debt.

  • If a debt collector violates the FDCPA, the debtor can sue them in state or federal court for damages and legal fees within one year of the violation. 

  • A debt buyer is a type of debt collector who purchases a creditor's debt at a discount in order to collect on it. Debt buyers generally pay a very low percentage of the face value of the debt, sometimes just cents on the dollar, through a bidding process. If the debt buyer recovers money from the debtor, they can collect 100% of monies without having to pay back anything to the original creditor.

  • Creditors or debt collectors may refer cases to attorneys who file lawsuits against debtors. If a money judgment is obtained against a debtor, they can begin garnishing wages and bank accounts, or put a lien on the debtor's property, because judgments are legally enforceable. A judgment, paid or unpaid, will remain on the debtor's credit report for 7 years.

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