Nobody wants to deal with debt collectors. Unfortunately, even if you don’t have debts in collections, you might still be harassed by one. Nearly half of the complaints received by the CFPB in 2020 dealt with attempts to collect a debt that wasn’t owed by the person getting contacted. The contact can also be less than pleasant. Even with the Fair Debt Collection Practices Act to prevent abuse, 10% of complaints were because collectors took or threatened to take negative or legal action.
Here’s a look at some key statistics about the challenges people face with debt collection in the U.S.Find more debt collection statistics »
Table of Contents:
Understanding the collection process
Missing a few payments shouldn’t spell the downfall of your financial health. Yet, that concern can turn to panic once a debt collector begins to call. The reality is that the calls don’t typically won’t begin until you miss six payments. That gives you quite a bit of time to address the past-due account before it gets sent to a collector.
If you can’t rectify the situation, however, it will go to collections. Here are the 6 steps you need to know about the debt collection process:
Phase 1: The creditor moves the delinquent account to a “charge-off” status
This means that the creditor effectively writes off your account as a loss. The account gets frozen, and you can’t make purchases with it.
Phase 2: The creditor sends the debt to a collector
Collectors are the ones that come after you. Debt collectors are people, agencies, or companies whose responsibility is to collect owed money. They can be an in-house collection department or a third party.
In some cases, the original creditor will keep the account and simply let collectors work on their behalf. In other situations, they will sell the debt to an independent third-party collector. That changes who you owe and has other implications we go into more detail about below.
Phase 3: Contact governed by the FDCPA
After a debt goes to a collector, they will try and get in touch with you to confirm they have the correct contact information and correct holder of said debt. Any conversations they have with you must adhere to the Fair Debt Collection Practices Act.
Phase 4: Identity confirmation
Once the collector verifies the holder of the debt, you will get a written “validation notice” which arrives within 5 days. It will state who the original creditor is, who owns the debt now, how much you owe and how to move forward.
If you do not receive this letter, request it and do not agree to any conversations about the debt until you receive it.
Phase 5: Facing collections head-on
The instructions for how to proceed will be on your validation notice, you have a few options you can take.
If you owe the debt and have the means, paying is the easiest way to make the collector go away. Be aware that paying in full may not remove the collection account from your credit report or immediately improve your credit score. A debt settlement plan may be a better option. This allows you to negotiate with the collector to pay back less than what you owe. If you’d like more information, give us a call at .
Collectors only have a limited time to take you to court. The statute of limitations for debt collection varies from state to state, but it’s a maximum of 15 years. Many states limit it to 6. So, you can wait it out, dodge those collection calls and then once the statute expires, then send a cease and desist.
Always verify a collection account
Debt validation is a legally granted right under the Fair Debt Collection Practices Act (FDPCA). The law mandates that within 5 days of the collector’s first contact, they must send you a written letter validating the debt.
This notice MUST include how much debt is due and the name of the creditor that owns the debt. If you do not respond within 30 days to dispute the debt, it becomes valid.
It is important that before you make any agreements to pay back the debt you make sure the debt is correct and valid. When debt buyers “buy” your debt, the full information isn’t always given to them. If collectors don’t have the required information, they have no legal right to collect.
Debt collection as a small business owner
As a small business owner making money and growing is your number one priority. But when people don’t pay the money they owe, it can be tough to survive. For growing businesses, unpaid invoices can cripple the finances of the business and even the owner. In this case, you become the collector or need to hire one on your behalf. While putting on your collector hat can be frustrating, it’s important to understand the impact that collections can have on your business. Why businesses need to take them seriously.
Dealing with debt collections when you’re on the hook
Having debt can take a toll on many aspects of your life and if you’ve resolved to becoming debt-free, debt settlement is one way to do it. Debt settlement is typically the fastest way to get out of credit card debt outside of Chapter 7 bankruptcy, and it usually works best for debts in collections.
It works in 3 basic ways:
- Respond to a settlement offer sent by a collector
- Try negotiating on your own
- Contact a settlement company or get a referral to an accredited company through Debt.com
A word of advice, debt settlement works differently, depending on the type of debt you need to settle. So, if you’re unsure what type of settlement program you need, call
Deciding to settle your debt is a big decision. It can help you get out of debt for less than you owe, but you must weigh the consequence of credit damage you’ll likely face. On average, the settlement of one credit card would drag your score down by 45 – 65 points if your FICO score was 680. The higher your score, the more points you drop.
Facing a collection lawsuit
A collection lawsuit occurs when you default on an unsecured loan or fail to pay a credit card off before it gets moved to charge-off status. When a company exhausts its resources trying to get you to pay the debt it will either sue you for payment or sell the debt to another company. Take note, that while you can get sued by either company, it must be before the statute of limitations expires.
The time this takes differs from state to state, so it’s important to look at how old the debt is. The most important thing to know when facing a civil summons for a lawsuit is to NEVER ignore it. It will not protect you from the consequences you would face in court and a judgment can get filed against you even if you’re not there.
How the FDCPA protects against collector abuse
The FDCPA keeps you protected against unlawful collection tactics. Collectors can be aggressive when attempting to collect a debt, but they can only go so far within the boundaries of the law. Put into practice in 1978 as part of the Consumer Credit Protection Act, the FDCPA establishes standards for debt collectors. The following graphic provides a breakdown of the most essential regulations of the FDCPA:
In most cases, the Federal Trade Commission (FTC) enforces these rules. A very important thing to remember is even if you legitimately owe a debt, you still have rights. The FDCPA is there to protect you, so know your right. Don’t be afraid to report harassment.
How to make a complaint against a collector
If you’ve been the victim of harassment from a debt collector, there are steps you can take depending on your goal. From suing the debt collector to reporting them to government agencies, to even using the violations as a negotiation tactic. And though you may not think of it as harassing, around 40% of complaints stem from repeated or continuous calling practices.
Check on the guidelines in the FDCPA and make sure that what happened to you violated the law. Keep in mind that if you are just filing a complaint, that is not enough to grant you any money. If you want compensation in the form of a harassment lawsuit, Debt.com can connect you to professionals to help you do this. If you need help with an abusive collector, give us a call at or complete the form below. Once we’ve connected you with the right resources to stop the harassment, we can connect you with the right experts to take care of your debt as well.
Find solutions to pay off debt and get on the right financial track.
Dealing with debt collections you don’t owe
Getting a call about owing a debt can put a hamper on anyone’s day, but when you can swear you don’t have any debt it becomes infuriating.
The first thing to do when you get a call concerning a debt is to verify it. Get the name of the collector and their company, as well as all other pertinent information, such as the original creditor you owed. Fake debt collectors are a real thing, so make sure to be on the lookout. If you don’t recognize the debt, if they refuse to give you their phone number or address or they try to scare you into paying, it should be an immediate red flag.
If you are still burdened by calls, a cease-and-desist letter can be one way to get the harassment to stop. Federal law requires that collectors cannot contact you once you send one, but they can still sue you. Should you find yourself in a situation where a collector hounds you for a debt you do not owe, a cease-and-desist letter is the way to go. If they take you to court, you just demonstrate you don’t owe the debt and the case should be settled in your favor.
If you know that you’ve been on the hook for debt in the past, make sure you look into the statute of limitations in your state. This is the legal amount of time that a collector can sue you for a debt. Should the specified amount of time pass, the debt is still there but legal action cannot arise. The collector can contact you but if you send a cease and desist, then even that contact must stop.
Suing a debt collector for harassment
The FDCPA outlines how collectors can communicate with you and what practices are adherently prohibited. Once a collector violates the law, you have the right to file a complaint and sue them in civil court. In 2021 there were 121,700 complaints filed with the Consumer Financial Protection Bureau (CFPB), 39,000 more than in 2020. 
Should you win your lawsuit, you can get 2 types of damage litigations. Actual damages, which is any money you’ve lost because of abuse or threats. You can also get statutory damages, which offer extra compensation up to $1,000 total, based on the level of abuse or number of violations. Collectors cannot harass you. This means that they can’t:
- Use threats of violence
- Use profanities
- Continuously call you
Lying is a backhanded tactic they will use if they believe you do not know the law. This can entail:
- Telling you a higher amount than you owe
- Threaten you with legal action or arrest
- Impersonating an attorney
Take heed and learn all the ways to protect yourself from shady collectors.
Debt collections and your credit
People believe that if you pay off a debt in collections it removes the damaging mark from your credit. The debt will appear on your credit report as paid, but it will remain on there for the next 7 years in most states.
Collections can have a significant impact on your credit score. The damage will lessen over time, but when it is initially reported, you will see the steepest drop.
The impact of debt collections on your score depends on a range of factors. Your FICO credit score when a debt goes to collections and if the account gets sold to a third party are two of the more important factors taken into account. For example, collections affect your score more if your score was high before the collection account happened. If the debt gets sold to a third party, the collector can report a separate collection account in your credit report.
Q:Can debt collectors call my friends and neighbors?
Q:Can a debt collector contact my employer?
The only people that debt collectors may reach out to, to discuss anything related to your debt are you, your spouse, or an attorney. No bosses, clients, coworkers, friends, distant relatives, etc. If a debt collector tries harassing other people to goad you into paying, you have a case for a harassment suit.
Q:Can a collector take my home or my kids’ inheritance with a judgment lien?
Eric Olsen, executive director of HELPS nonprofit law firm advises, “There are many reasons why a senior doesn’t need to fear a judgment lien. Seniors often don’t realize the federal and state laws that protect their money from debt collectors. And because of this protection, many credit card companies see that it’s not economical to sue seniors for past-due debt in the first place.”
Q:Do debt collectors have to accept any payment?
Q:What happens when creditors sue?
Second, consider an attorney who specializes in debt. If you can afford professional guidance, it can help you in responding to the lawsuit and in some cases, work out a deal to drop the lawsuit. You can also find free legal aid in your area.
Lastly, bankruptcy should be an option. While it shouldn’t be your first resort, it can be a viable last resort. If you are overwhelmed with debts and collection accounts, it’s the easiest way to discharge all of them at once.
Q:Can a credit card company sue you after 7 years?
Article last modified on October 10, 2022. Published by Debt.com, LLC