Debt Collection

Authored By: Lagniappe Law Lab
Read this in: Spanish / Español


About Debt Collection

If you owe money and don’t pay on time, the company might get someone (called a debt collector) to ask you for it. Should you find yourself in this situation, it’s crucial to be well-informed about the rights and limits surrounding debt collection. Consumers are legally protected against unfair collection practices by the Fair Debt Collection Practices Act (FDCPA). You can report problems to the Federal Trade Commission via

What You Need To Know

Creditors can either sell the debt to a collection agency, in which case the agency then owns the debt and any money recovered.

Alternatively, creditors can hire a collection agency to collect the debt on their behalf, in which case the creditor still owns the debt and the agency is merely acting as an agent, often for a fee or a percentage of the collected amount.

The original creditor is the company that gave you the loan or credit.

An original creditor may attempt to collect a past due debt or account itself, or it may hire a debt collector. A debt collector is generally a third party who has been contracted to collect your debt or account. The name of the company contacting you about an unpaid debt may be different than the original creditor who gave you the loan or credit. The original creditor also may sell your debt or account to another party who may then collect the debt or place it with a different debt collector. 

If you have a bill that you haven't paid after a certain amount of time, the company you owe might decide they're unlikely to get that money from you directly. So, instead of chasing after you themselves, they might either sell that debt or give it to a specialized company known as a "debt collection agency.” This agency then tries to get you to pay up.

Here are the types of bills that often end up with these agencies:

  1. Credit card: When you don't pay your credit card bills.

  2. Car loan: Money you owe for buying a car. If you don't make your payments, they might come after you.

  3. Medical/hospital bills: If you had a medical procedure or treatment and didn't pay the hospital or doctor.

  4. Student loans: Money borrowed for schooling. If you don't pay back after finishing school, debt collectors might get involved.

  5. Mortgage payments: This is the money you owe on your house. If you don't pay, not only can collectors come after you, but there's also a risk of losing your home.

Remember, the original company or bank doesn't want to waste their time and resources trying to get the money from you, so they let the debt collection agency handle it.

If you owe money on a credit account and don't pay it back on time, the company (or lender) you owe might ask another company, called a "collection agency", for help. Collection agencies are businesses that buy these unpaid bills and then try to get people to pay up.

Some of the companies you owe might try to get the money back themselves using their own team, while others might get outside companies to do this for them. In extreme cases, they might even get lawyers involved to take the person owing money to court. But no matter how they go about it, their main aim is to get in touch with those who owe money and get them to pay back what they owe.

If your overdue debt has been bought by a collection agency, they'll first let you know, either through a call or a letter. By law, they have to send you a written letter, known as a debt validation letter, within five days of their first try to reach you. This letter will tell you how much you owe, and who you originally owed it to, and that you can challenge the debt if you think there's a mistake.

Hold onto this letter. It's crucial if you later decide to challenge the debt. Once the debt collector has reached out to you, you should start thinking about how to pay back what you owe.
If the collection agency reports the unpaid debt to one or more of the three main credit reporting agencies (Equifax, TransUnion, and Experian), it could hurt your credit score. So, it's wise to check your credit reports and see if this debt is listed.

After attempting to collect a debt through traditional means (calls, letters, etc.), a creditor or collector may choose to escalate the matter to court. The debtor is then issued a summons, which is a legal document that notifies them of the lawsuit and demands their response.

Responding to a debt collection summons is a critical step when a debtor is being taken to court for an outstanding debt. By initiating a lawsuit, the creditor seeks to obtain a legal judgment against the debtor, which can allow them to garnish wages, levy bank accounts, or take other collection actions. The debtor has a legal obligation to respond to the summons by the specified deadline to avoid an automatic judgment in favor of the creditor. 

Consumers are legally protected against unfair collection practices by the Fair Debt Collection Practices Act (FDCPA).

The FDCPA specifically regulates third-party debt collectors (those who collect debts on behalf of another entity) and doesn't necessarily apply to original creditors. The law applies to mortgages, credit cards, medical debts, and other debts for personal, family, or household purposes. business/commercial debts aren't covered by the FDCPA.
If you suspect a collection agency is pursuing you through unfair means, report your concerns to the Federal Trade Commission at or the Consumer Financial Protection Bureau at

  1. Contact You: They can reach out to you using various means, including phone calls, between the hours of 8 a.m. and 9 p.m. This timing is set by the Fair Debt Collection Practices Act (FDCPA) to prevent undue harassment.
  2. Use Digital Communication: Debt collectors can email, text, or even send direct messages via social media platforms, provided they don't harass or deceive you.

  3. Contact Your Family: They can speak to your spouse or other family members, but typically only to determine your whereabouts. They shouldn't disclose your debt details to them without your permission.

  4. Take Legal Action: Debt collectors have the right to sue you for the unpaid amount. If you receive a legal notice, it's crucial to attend court. If you don't, they could win by default, potentially leading to wage garnishment or other repercussions.

  5. Seek Payment on Old Debts: They can attempt to collect on debts that are past the statute of limitations, but you can't be sued for these debts once they're beyond this period. The exact time frame for the statute of limitations varies depending on the type of debt and state laws.

  6. Charge Interest: Debt collectors can add interest to the amount you owe, but they can't double charge. Meaning, that if you were already paying interest on the debt, they can't add extra on top.
  1. Deceive You: They can't lie about their identity, the amount you owe, or any other pertinent details related to the debt.
  2. Publicly Expose You on Social Media: Debt collectors are not allowed to publicly tag or post about your debt on social platforms, as this would violate privacy rules.

  3. Ignore Written Requests to Stop Communication: If you've sent them a certified letter asking them to stop contacting you, they should cease communications. This doesn't eliminate the debt, but it can stop the calls, texts, emails, and letters.

  4. Repeatedly Embarrass You: They cannot contact other people (like friends or neighbors) about your debt multiple times in an attempt to shame or pressure you. They can usually only contact them once, and that's to determine your whereabouts.

  5. Garnish Your Wages Without Legal Action: Except for certain situations like unpaid student loans or debts to the IRS, debt collectors can't take money directly from your paycheck without first suing you and getting a court order.

  6. Harass or Threaten You: They can't use profane language, threaten you with jail time, or use any other intimidating tactics. Contrary to what some might claim, debt collectors do not have the power to arrest you for unpaid debts.

Steps To Deal With Debt Collectors

Dealing With Debt Collectors

Just as you wouldn’t jump into a contract without understanding its terms, don’t rush to make a payment when a debt collector contacts you. Take time to think through your options for paying off a debt in collections.

Don’t pay, don't promise to pay, and don't give any payment information the collector may use later. Ask for information on the debt and say you'll call back to discuss it later.

Making a single payment — even just $5 or $10 — is an acknowledgment of the debt and can have serious repercussions. If the debt is past the statute of limitations, for example, making a payment will reset that clock and could lead to a lawsuit or wage garnishment.

Steps To Dealing With Debt Collectors

In accordance with the Fair Debt Collection Practices Act (FDCPA), The Federal Trade Commission ensures that all debt collectors follow certain debt collection laws. It’s important to know what these laws are so that you know if a debt collector is violating your rights. All debt collectors must follow these rules:

  • They have rules for contacting you. Debt collectors are only allowed to call you between 8 a.m. and 9 p.m., and they’re not allowed to call you at work. You might be dealing with a debt collection scam if you get a call outside of these hours. If a debt collection agency is legitimate, it should have no problem providing you with company information, including a callback number, company name, and address.

  • They can’t lie or harass you. Debt collectors can’t make you pay more than you owe or threaten you with arrest, jail time, property liens, or wage garnishment if you don’t pay. Wage garnishment is legal but only after your debt collector takes you to court first and gets a judgment. If a debt collector is posing as police and threatens to arrest you, there’s a chance that it’s a scam; in this case, you can report the threat to the Federal Trade Commission and the Consumer Financial Protection Bureau.

  • Debt collectors must provide you with information about your debt. They have to tell you a few key facts about your debt, also called “validation information.” This includes things like how much you owe, who the original debt was owed to, and what you can do if you don’t think this is your debt.

If a collector violates any regulations, report them to the Federal Trade Commission and Louisiana's attorney general office.

Before discussing anything, ensure the collector and the agency are legitimate. Scammers often pose as debt collectors. 

Without admitting the debt is yours, get information from the debt collectors before you make plans to deal with it. Ask who the original creditor was, the original debt amount, and how much is owed. The more details the debt collector can provide, the better. 

Legitimate debt collectors are required to send you a letter in the mail within five days of contacting you detailing your outstanding debt, such as who the original creditor is and how to contact them, as well as how much you owe. You should also get information about how to dispute the debt, which can come in handy if the debt in question isn’t yours. Send a written request for one if you don’t get one so that it is documented. 

When the original creditor sells a debt to a third party — which might go on to resell the debt again, and so on — recordkeeping often falls by the wayside. Many sold debts have errors about the amount owed or even who owes it.

The debt notice with required details is another layer of consumer rights protection. If a debt collector doesn’t give this information by the required timeline, yet keeps contacting you for collection, you can sue them in a federal or state courtroom for violating your consumer rights.

After you’ve received your letter and verified that the debt is yours and that it’s still within its statute of limitations, see if the debt collector will settle for a portion of the cost if you pay upfront. 

Many collectors buy debts for pennies on the dollar, so they might be willing to settle for less than the full amount to ensure a quicker resolution.

Offer to pay a portion of the debt upfront in exchange for the rest being forgiven. The amount they'll accept can vary, but initial offers often range from 30% to 50% of the total debt.

If the collector isn't willing to settle, or if paying a lump sum isn't feasible for you, propose a payment plan. This would involve paying off the debt in installments over time. Keep in mind that some collectors may want to add interest or fees, so it's important to discuss and understand these terms upfront.

Before you pay anything or provide any payment information, ensure all agreed-upon terms are documented in writing. This includes the settled amount, the number of payments, payment dates, and any other relevant details.

Having written documentation protects you from potential misunderstandings or disputes down the line. It can serve as proof that you've fulfilled your obligations or that the collector agreed to specific terms.

Responding to a debt collection summons is crucial because ignoring it can have serious consequences. When you are served a summons, it means that a creditor or debt collector has filed a lawsuit against you due to unpaid debts.

Pay close attention to any deadlines mentioned in the summons to ensure that you respond promptly and avoid default judgments.

  • If you ignore the summons, the court will likely issue a default judgment against you.
  • A default judgment usually favors the plaintiff (the debt collector or creditor) and may include the original debt amount, interest, and additional fees.

Responding to the summons might give you an opportunity to negotiate the debt, potentially reducing the amount or structuring a payment plan.

Other Issues To Consider

Other Issues To Consider

These are some other issues or considerations related to debt collection. 

Other Issues To Consider

Having debt can mean you are open to debt collection scams. You may even encounter these types of scams if you don’t have any real debt. To make sure that a debt collector is legit, keep an eye out for the following signs:

  • Watch your mailbox. A validation letter is one way to make sure that you’re dealing with a legitimate debt collector. If you’ve just gotten a phone call from an alleged debt collector, request a validation letter before attempting to pay off the debt in question.

  • Verify your details. Even if the company is legit and the debt is legit, there’s a chance that it might not be yours. Request personal details about the debt, including the original creditor and the amount. While the debt might be real, it could be for someone else who shares your name, or it might be from an act of identity theft.

  • Check Licensing: Ensure the debt collector is licensed to operate in your state. You can usually do this by contacting Louisiana's attorney general office or the Consumer Protection Bureau.

  • Beware of Aggressive Tactics: Scammers often employ high-pressure tactics, threatening immediate legal action, arrest, or even physical harm. Legitimate debt collectors must adhere to the Fair Debt Collection Practices Act (FDCPA), which prohibits such behaviors.

  • Research the Debt Collection Agency: If you're unsure about the legitimacy of the caller, hang up and call back on an official number after researching the agency. Never use the callback number they provide until you've confirmed it's genuine.

  • Protect Your Personal Information: Never provide or confirm personal information unless you're sure of whom you're dealing with. Scammers often use this tactic to gather information for identity theft.

  • Make sure you can pay the way you choose. If the person on the phone claims that you can only pay through a wire transfer or a prepaid debit card, you might be dealing with a scammer. Even though debt collection isn’t ideal, most companies will work with you to get a debt paid through terms you’re comfortable with. You should also try negotiating — many debt collectors are willing to create a plan that helps you pay.

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.

While a collector may obtain a judgment that allows them to garnish an account, they typically won't have continuous access to view the account balance at any given time.

There are also additional garnishment protections if you receive federal benefits, such as from the Social Security Administration or the Department of Veterans Affairs, that are directly deposited into your bank account. If this is the case for you and a collector tries to garnish funds in your account, your bank or credit union must protect two months' worth of the benefits and let you use that money.

In most credit scoring models, your payment history accounts for the largest portion of your credit scores. That means late payments — especially those that end up in collections — will likely have a negative effect.

When the collection debt is paid off, the debt collector must update the information reported to reflect that the collection is paid off. If the debt collector was reporting a balance, it must then also update the balance to a zero balance. Even if you pay off a collection account, the fact that it went into collections can still remain on your credit report and may continue to affect your score. Debt that is in collections may remain on file for up to 7 years from the original delinquency date (or date of first delinquency) or the date of the first missed payment due to the original creditor.

Settling a debt for less than what was originally owed can also be reflected in your credit report.

If the same debt is sold to different collection agencies and each reports it, this can show up multiple times on your credit report. It's important to regularly review your report and dispute any inaccuracies.

Last Review and Update: Sep 25, 2023
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