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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo Editorial integrity
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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. If you fail to keep up with credit card or loan payments or other types of outstanding debt, your outstanding balance may be sent to a debt collection agency. Having debt sent to collections can be a stressful situation that includes receiving regular phone calls and letters from the agency attempting to recover the debt. If you wind up in this situation, it’s important to understand how debt collection agencies work and what protections and assistance may be available to you. COVID-19 debt protections
If you are struggling to make your payments due to COVID-19 or think you may struggle with them down the road, contact your lender directly. While many of the COVID-19 related support and relief programs are winding down or have been discontinued, some lenders and credit card issuers continue to offer hardship assistance that can provide some help for the short term. These continued hardship programs may still allow you to defer or temporarily adjust your payments to make them more manageable. Some lenders for instance are still offering temporary interest-only payments on traditional loans if you continue to face financial hardship and others are offering credit line increases. While these programs can provide temporary relief, it doesn’t mean that your debt is being paid off or that it’s been forgiven. What is debt collection
is when a collection agency or company tries to collect past-due debts from borrowers. You might be contacted by a debt collector if you haven’t made loan or credit card payments and those payments are severely past due. If you’ve or you’re an authorized user on a credit card for someone else, you might also be contacted by a debt collection agency looking to get paid for money owed. Those overdue debts can be anything, including: Medical debt Car/auto loan debt Personal loan debt Credit card debt Student loan debt Unpaid utility and phone bills Debt collectors are third-party companies that work on behalf of another company to collect debts. If a company works for the original creditor, the creditor pays the debt collector a percentage of the debt collected. Sometimes, debt collection agencies will buy out the original debt for pennies on the dollar after you fail to pay back the debt to the original creditor — and then go after you. How does debt collection work
Debt collection might vary based on the company that’s collecting a debt. Some agencies only deal with a specific kind of debt, like medical debt or student loan debt. Others might deal with debt that’s a few years old. Others might not deal with debt if it’s past the statute of limitations, which is . Collection agencies can come after as soon as it’s a couple of months past due and indefinitely after that. It depends on the company collecting the debt, how much you owe and the type of debt you have. If you have unpaid past-due debt, you’re typically alerted through written notices and phone calls through your original creditor. For instance, if you have an old student loan you stopped paying, your lender will make attempts to contact you to get the account current. If it’s unsuccessful in getting you to pay what you owe, it’ll eventually stop. That’s usually when the transition from the original creditor to debt collector occurs. Debt collection agencies and debt collectors will use the information on file to contact you. Your current address, your phone number and even contact information for your relatives are used. If they can, debt collectors will use personal banking information, including savings and investment accounts, to determine if you have the money to repay a debt. Some states allow wage garnishment to collect old debts. How reputable collectors operate
While there are plenty of agencies that use harmful practices for debt collection, most follow the rules and go about retrieving money from past-due accounts in a professional manner. Reputable debt collection agencies will send letters to the address you gave your creditor. If there’s a way to see that you’ve moved, agencies can send letters to your new address in an attempt to collect a debt. Whether agencies send you letters or call, they’re required to give you specific details about your debt, including: The name of the original creditor. The amount you owe (including late fees and other charges). Your ability to dispute the debt in question, along with stipulations. The collector must say that you have 30 days to dispute the debt in writing. If you request the name and address of the original creditor, they need to tell you. If you don’t dispute the debt within 30 days, the agency considers your debt valid, and they can continue to contact you to collect a debt. Companies that follow the rules will work within the statute of limitations, based on the type of debt you owe and where you live. They’ll contact you only between 8 a.m. and 9 p.m., although you might get many calls within one day. When collection agencies operate the right way, you shouldn’t experience harassment or threats. If a company says that you’ll be arrested, that police are on their way or that someone is coming after you, they’re not acting lawfully. Why the Fair Debt Collection Practices Act matters
Because of the , or FDCPA, you as a consumer don’t have to stand for harassment and threats from debt collectors. Some tactics that aren’t allowed include: Pretending to be an attorney, law enforcement or anyone other than a debt collector to make you pay. Lying about the debt, including making false claims about where it came from or that you owe more than you do. Other deceptive or abusive practices, including threatening to have you arrested. If you’re experiencing harmful practices by a debt collector or someone claiming that they’re attempting to collect a debt, you can contact government agencies to report them. Here’s how: File a complaint with the . File a complaint with the . File a complaint with your state’s . You can also sue a debt collector under the FDCPA for deceptive practices. If you win in federal court, the debt collector will pay your attorney fees and possibly damages. How to deal with a debt in collections
If your debt enters into collections, this step-by-step guide can help you through the process. Confirm that the debt is yours. Debt collection agencies are required by the FDCPA to send you a debt validation letter before you pay anything. This is a crucial step in the process because it confirms if the debt does belong to you. A debt validation letter will also outline how much is owed, the type of debt owed, details about the creditor and other important information. If there are any errors, you have 30 days to dispute the debt. Explore your payment options. When it comes to paying your debt, you’ll typically have two repayment options. You can either pay off your balance in a lump sum amount or with a repayment plan. The best option for you will depend on your budget and the amount of debt owed. Before making a decision on a plan, calculate how much you can reasonably put down. You may be able to negotiate a repayment plan for less than what you owe, or you may choose to work with a credit counselor or go on a . Begin making payments. Before you begin making any payments, reach out to your debt collector and ask for a written agreement. Once you’ve received the agreement and have carefully reviewed the information for accuracy, you can start making payments. After you’ve made your first payment, reach out to the collector to make sure that it was received and document every single payment you make for your future records. How does a debt in collections affect your credit
An unpaid debt in collections can have a major impact on your credit score. If you have a delinquent account, your creditor can report it to credit bureaus, resulting in a drop in your credit score. Collections can for up to seven years from the first delinquent date. The impacts of this account should lessen with time. After seven years, the account should fall off of your credit report. If it doesn’t, you can file a dispute with the credit bureau in question and have it removed. There are some instances however when debt collections will not impact your credit score. Earlier this year the country’s three credit bureaus announced changes to medical debt reporting procedures. Beginning July 1, medical collection debt that has been paid off will not appear on your credit report. That means if you had a medical bill that was forwarded to a collection agency and appeared on your credit profile, it will be removed. Additionally, there is now a longer grace period before which unpaid medical collection debt will be added to your report. The timeline has been increased from six months to one year. The credit bureaus also announced that medical collection debt of $500 or less will no longer appear on credit reports. The bottom line
Collecting a past-due debt is a legal way for creditors and debt collection agencies to get money that’s owed to them. If you’re late on payments — or haven’t made them at all — you owe it to companies to pay that money back. Otherwise, you could face a barrage of calls and letters from debt collectors trying to collect a debt. But while you might owe money, you have the right not to be the subject of deceptive or abusive behavior from a debt collector. If someone is harassing you to collect a debt, you can take action right away. Contact federal agencies or your state attorney general to file a complaint. Learn more
SHARE: Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles