Can a creditor refer my account to a collection agency before my debt is due? Do I have to be told before a debt is turned in to collections? | Consumer Financial Protection Bureau (2024)

FAQs

Can a creditor refer my account to a collection agency before my debt is due? Do I have to be told before a debt is turned in to collections? | Consumer Financial Protection Bureau? ›

You should receive a statement before you are asked to make a payment. Generally, the creditor does not have to tell you before it sends your debt to a debt collector, but a creditor usually will try to collect the debt from you before sending it to a collector.

The “777 Rule” states that debt collectors may attempt to contact a consumer about a single debt up to seven times in seven days. Phone numbers do not matter; it's the number of debts that matters.

Your Right to a Validation of the Debt

After receiving your request, the debt collector must provide you with information about the debt, including the amount owed and to whom it was owed. Collection activities must stop until they provide this information.

There can be an assumption that you know you owe money based on what the insurance did and didn't pay, and debts can be turned over to collections in some cases without a notice to you. When a debt is sent to collections, it is being written off the books by the original creditor.

Debt collectors may collect interest, fees, charges, or other expenses to your debt only if they are expressly authorized by the agreement creating the debt or are otherwise permitted by law. If you ask, the debt collector must tell you how much it is charging you and why.

Under the FDCPA, first-party collections are not subject to the same rigorous regulations third-party agencies are required to uphold. This is mainly because the original creditor is usually protected under whatever agreement is signed by the creditor and the consumer.

The FDCPA and Regulation F set forth broad prohibitions on using unfair, unconscionable, false, deceptive, misleading, harassing, abusive or oppressive practices or means to collect a consumer debt.

In order to win a court case, a debt collector must prove that they have proper ownership of the debt, that you actually owe the debt, and that the amount they claim you owe is correct.

But what must the creditor provide by way of documentation? At a minimum, it must produce: A copy of the original written agreement between the parties, such as the loan note or credit card agreement, preferably signed by you.

Can you dispute a debt if it was sold to a collection agency? Your rights are the same as if you were dealing with the original creditor. If you do not believe you should pay the debt, for example, if a debt is stature barred or prescribed, then you can dispute the debt.

How long before a debt becomes uncollectible? ›

The statute of limitations on debt in California is four years, as stated in the state's Code of Civil Procedure § 337, with the clock starting to tick as soon as you miss a payment.

Beyond contacting you directly, they can take you to court and sue for what you owe them. If they win—or you don't show up in court—they may be able to take money from your bank account, garnish your wages or place a lien on your property. After a certain period, debt collectors lose the right to sue you in court.

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.

Of course, they'll most likely make phone calls and send collection letters. But some creditors can also record a lien against your property, levy your bank account, garnish your wages, or repossess your car or other personal property.

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

Don't provide personal or sensitive financial information

Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.