Ignoring debt collectors can lead to a number of outcomes , including a negative impact on your credit score and being sued in court. If a debt collector obtains a summary judgment against you, they could garnish your wages, freeze your bank account, or put a lien on your property.
- A negative impact on your credit score.
- The debt purchased by a debt buyer.
- A summary judgment against you in court.
Credit reporting implications of ignoring debt collectors
When you are late paying your bills, those late payments show up in the section of your credit report called trade lines. You have one trade line for each account with information about when you opened the account, your credit limit, your payment history, and your account balance.
Once a creditor turns your account over to a third-party debt collection agency, then the debt collection agency reports that your debt is in collection. That shows up in a later section of your credit report. Having a debt in collection hurts your credit score, which can impact your ability to obtain other types of credit, the interest rate you’re offered, and even whether or not you’re able to rent an apartment or get a job.
When you ignore a debt collector, it delays your ability to dispute a debt. The right to dispute the debt is guaranteed under the Fair Debt Collection Practices Act (15 U.S.C. 1692g). The debt collector is required to send you a written notification within five days of first contacting you, and you have 30 days to dispute the debt. If you don’t open the debt collector’s letter, you essentially waive that right because a debt collector is allowed to assume the debt is valid after that 30-day window closes.
In contrast, when you dispute a debt that’s been reported to a credit reporting agency, the debt collection agency is obligated to tell the credit bureau that the debt is disputed, and the credit bureau must note that in your credit file.
Uncollectible debt sold to debt buyers
When the original creditor is unsuccessful in getting a consumer to pay, it often hires a third-party debt collection agency to try. If you ignore debt collectors for long enough, the debt may be deemed noncollectable. If that happens, then batches of similar debts may be sold to debt buyers. If debt buyers are unsuccessful in collecting the debt, they may repackage and sell blocks of debt to other debt buyers.
While this may seem like a good outcome for the consumer, it’s often the opposite. Over time, important data about the debt may disappear or get mixed up with another debt. As a result, inaccurate information may be reported to credit bureaus, questionable fees and interest may be tacked on, and so forth. Until recently, consumers were protected under the Fair Debt Collection Practices Act (FDCPA) because debt buyers were considered third-party collectors. (The FDCPA doesn’t cover original creditors, only third-party collectors.) However, in Henson vs. Santander Consumer USA Inc., the Supreme Court ruled that debt buyers are collecting their own debts, and so aren’t bound by the FDCPA.
Ignoring debt collectors can lead to a lawsuit
When you don’t open debt collection letters – whether from the original creditor, a third-party debt collection agency, or a debt buyer – you may miss important information, including that you’re being sued for the debt. If you’re sued for a debt and don’t respond or show up in court to defend yourself, then you may have a summary judgment entered against you. With a summary judgment in hand, a debt collector may be able to garnish your wages, freeze your bank account, or put a lien against your property. That judgment will likely be for the amount that the creditor, debt collector, or debt buyer says you owe – which may or may not be the truth. It’s difficult to vacate a court judgment, so it’s in your best interest to be aware of what debt collectors are up to.
It’s important to note that, even if you do open mail from debt collectors, you may not know if you’re being sued. In Sykes vs. Mel S. Harris and Associates, LLC, the court ruled that default judgments were fraudulently obtained because of “gutter service” or “sewer service,” which is when a litigant attests that they have served the consumer with court documents when they never actually did so.
Ignoring debt collectors is never a good strategy. Debt collectors often violate the FDCPA. When they do, you have recourse against them. The law provides for statutory damages up to $1,000, plus court costs and attorney fees. In other words, you can turn the tables on unethical debt collectors and make them pay you.
Lemberg Law has a team devoted to representing people who have been harassed, threatened, deceived, or abused by debt collectors. Call 844-685-9200 and receive a free consultation, or submit our online request form.
Henson vs. Santander Consumer USA Inc., 582 U.S. ___ 137 S. Ct. 1718; 198 L. Ed. 2d 177
Sykes vs. Mel S. Harris and Associates, LLC, No. 09 Civ. 8486 (S.D.N.Y.)
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