What Happens When Your Debt Goes to Collections?
If you consistently fail to make your monthly debt payments, your debt will be reported to a collection’s agency. This will have an extremely negative impact on your credit (credit score will decrease, will alter your “credit character” aka how other lenders see your habits
A collection agency is a company that lenders use to recover funds that are past due or from accounts that are in default. Collection agencies work closely with the credit bureaus and lenders to try to retrieve delinquent funds.
- Collectors may not call you before 8am or after 9pm
- Collectors may not contact you at work if you’ve told them you’re not allowed to receive calls there
- If you are represented by an attorney, collectors must generally communicate with you through the attorney
- Collectors cannot harass you, lie, or engage in unfair practices. From the FTC’s website, this means collectors may not:
- Threaten you with violence or harm
- Use obscene or profane language
- Repeatedly use the phone to annoy you
- Misrepresent the amount you owe
- Lie about being attorneys or government representatives
- Falsely claim you’ll be arrested, or claim legal action will be taken against you if it’s not true
- Try to collect interest, fees, or other charges on top of the amount you owe, unless the original contract or your state law allows it
- Deposit a post-dated check early
- Take or threaten to take your property unless it can be done legally
Collectors must stop contacting you if you send them a letter requesting it (Note that collectors may still sue to collect the debt). There is a statute of limitations and a credit reporting time limit on debts. The statute of limitations limits the ability of collectors to win judgements on debts. The credit reporting time limit dictates how long negative information can stay on a credit report.
If you feel that a collector has violated the FDCPA, you may report them to the State Attorney General’s office, the Federal Trade Commission (FTC), and the Consumer Financial Protection Bureau (CFPB). A violation does not make the debt go away.
You have the right to sue a debt collector if you believe they have violated the law. If successful, you may be awarded up to $1,000 plus legal fees. You may also sue for damages arising from the illegal debt collection practices, such as lost wages or medical bills.