What is Collection?

A debt is created whenever a consumer borrows money or uses services – whether in the form of a car loan, a credit card balance, or a cell phone contract. If the consumer doesn’t repay the debt as agreed, then the collection process is initiated. Often, the creditor will begin by trying to collect the debt in-house, perhaps by sending reminders or overdue payment notices. After 60 to 180 days, the original creditor may chalk the amount up as “bad debt,” and contract with a third-party debt collection agency to pressure the consumer into paying. If the debt collection agency is able to collect the money, they typically keep a commission and return the rest to the original creditor. Sometimes, old debt is sold in bundles to debt buyers, who in turn attempt to collect the debt.

What does collection mean?

Once a third-party debt collection agency is engaged, collectors typically start by ensuring that they have the correct contact information for a consumer. This process, which is called skip-tracing, may include contacting the consumer’s employer, friends, or relatives. It can also include accessing public databases, such as property tax records and vehicle registrations.

There are limits to what debt collectors can say when they contact those close to the consumer. According to the federal Fair Debt Collection Practices Act (15 U.S.C. Section 1692b), debt collectors are allowed to contact a friend or family member and ask for the consumer’s address and phone number, but they can’t reveal the consumer’s debt and can only reveal that the collector works for a debt collection agency if specifically asked. In Romano v. Williams & Fudge, a debt collector used skip tracing and then contacted the consumer’s estranged father about the consumer’s student debt. The collector revealed the nature of the debt to the father, which the court found violated the FDCPA.

How does collection work?

Once a debt collection agency has contact information for the consumer, then the collector gets to work. They typically begin by calling the consumer and asking for repayment. According to the FDCPA, the collection agency is required to send the consumer a notice within five days of first contact that states the creditor’s name and the amount owed, as well as the following three points:

• There is a 30-day window to dispute the debt.
• The debt collector mustverify a disputed debt.
• The name of the original creditor must be provided.

If the consumer disputes the debt, then collection efforts must cease until the debt collection agency verifies the debt. If the consumer doesn’t dispute the debt within the 30-day window, then the debt collection agency is permitted to assume that the debt is valid.

What steps do collectors take to recover a debt?

Following the initial phone call and letter, debt collectors can use a variety of methods to collect a debt. Often, debt collection agencies send a series of letters in the mail, called dunning letters. In the same vein, debt collection agencies often employ autodialers to robocall consumers who are facing collection. When the consumer answers, the call is transferred to a debt collector, who attempts to convince the consumer to pay the debt, agree to a payment plan, or negotiate a lump sum payment to satisfy the debt.

In parallel to debt collection letters and phone calls, a debt collector typically reports the debt to consumer reporting agencies. The three largest credit bureaus are Experian, TransUnion, and Equifax. Collection activity is recorded in a section of a consumer’s credit report that also lists things like litigation and criminal convictions.

The FDCPA outlines a number of illegal debt collection practices, and allows consumers to sue debt collectors who violate the law. If the consumer prevails, they can be awarded up to $1,000. 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.

Case citations

Romano v. Williams&Fudge, Inc., No. 2:2008cv00634 – Document 53 (W.D. Pa. 2008)