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Collection Agency - Complete Guide to Handle Collection Calls

Collection Agency
Betsalel Cohen
UpdatedApr 11, 2024
Key Takeaways:
  • Debt collection agencies work on behalf of creditors to get you to pay.
  • Debt collector agencies send letters and make calls. They are not allowed to harass you.
  • Learn how to negotiate with debt collectors and don't ignore lawsuits.

Ignoring or missing payments on a credit card or medical bill doesn't make the debt magically disappear. Instead, expect a collection agency to send a letter or make a collection call. Dealing with debt is stressful, and threats and pressures from a debt collector aren't going to make your life easier. 

Be prepared and arm yourself with the best information to deal with a collection agency. 

What's inside this article
  1. What is a collection agency?
  2. Major debt collection agencies
  3. Validate your debt
  4. Is it an old debt?
  5. Negotiate your debt
  6. How to deal with harassment 
  7. How to deal with a lawsuit
  8. Fixing your credit report

 What is a collection agency? How does it work?

Collection agencies are private companies that attempt to collect on delinquent bills and debts. The types of debt vary, including loans, medical bills, credit cards, utility bills, and cell phone bills. Parents can even hire collection agencies to collect delinquent child support. 

Most creditors report debtor payments to credit reporting agencies (CRAs). Overdue payments show up as delinquent between 30-60 days after their due date. Usually, creditors start to move the debt through a collection process after that time. 

Some creditors have in-house collection departments, while others turn the delinquent debt over the debt to a third-party debt collection agency. Sometimes this third party acts as a middleman for the original creditor. Creditors pay it a fee for debt collection services. 

Then, there are debt buyers who buy past-due balances for pennies on the dollar and aggressively attempt to collect the debt through debt negotiations or a lawsuit. Any money they collect stays in their pocket.

Spam emails and phone calls are widespread, with scammers trying to get your personal information. Whenever a debt collector contacts you, do not give out sensitive information. Identify the caller and ensure the company has a valid collection agency license. Ask for their name, company name, and why they are contacting you.

Debt collection agencies

Are you getting a call or letter from a collection agency? Learn more about them. Here is a list of top debt collection agencies covered by

Do you owe the debt collection agency money? Validate your debt

In most cases, you probably owe money to the collection agency. However, since you didn't borrow money or receive a service from them, you probably won't recognize their name. 

Federal and state laws regulate collection agencies and third-party debt collectors' operations. The federal law that applies to third party agencies does not govern original creditors, but they must also follow specific debt collection rules when attempting to collect from a debtor. One of their obligations is to verify that the debt is authentic.

The first thing that you need to do is validate the debt. Once a debt collector contacts, you have thirty days to ask for verification. Send a debt validation letter through registered mail. Check the page for a sample letter. The debt collector must cease collection activities until they send you a copy of the verification. Their letter should include:

  • The name and address of the original creditor.
  • A statement from the original creditor that the debt is valid.
  • The amount of the original debt.
  • Copies of judgments (if any).

If the agency fails to comply, send them a notice of insufficient validation. Although the burden of proof is limited, if they don't validate your debt, the agency has no legal basis for collecting it. 

Is it an old debt? Check the statute of limitations

The age of the debt makes a difference. If it is an old debt, it might limit the options available to the collection agency and increase your negotiating power. You want to be careful about re-aging the debt. Creditors have the right to call, send letters, and try to persuade you to pay. However, if the statute of limitations (SOL) expires, only the original creditors can sue. Once expired, a third-party creditor that bought your debt is not allowed to sue. 

When dealing with a collection agency, be careful not to re-age a debt. Don't make a voluntary payment or acknowledge the debt.

Statutes of limitations are tricky. State laws set a time limit for debt collections. For example, the California statute of limitations for credit card debt is four years and six years in New York. However, it is still possible for some creditors to sue you even if the time has expired. Sometimes it is hard to determine the actual age of the debt and the existing law that covers it. The collector may have a different take on the expiration date and pursue a lawsuit against you.

Negotiating with a debt collection agency

Most agencies buy collection accounts for 1 to 10 cents on the dollar. Even those acting as agents for the original creditors want to close an account as quickly as possible. They contact you through emails and phone calls and apply pressure tactics to get you to pay as much as possible. Since most consumers fall behind on payments due to hardship, almost all collection agencies are willing to reach an agreement. 

Your first option is to try to negotiate a settlement with them. Debt negotiation is a skill and requires a significant amount of time and effort. Here are three tips:

  • Be calm, clear, and convincing.
  • Be persistent.
  • Send a debt negotiation letter.

Consider using a professional debt negotiation company if you have a large debt (or debts). For example, Freedom Debt Relief, a top debt settlement company, has years of experience dealing with both original creditors and collection agencies. They rely on databases of past settlements so their negotiators know what range original creditors and collection agencies have accepted for payments in the past. With their large teams and digital systems, they can quickly reach a negotiated settlement with your debt collection agency.

How to deal with debt collection agency harassment?

Third-party debt collectors and debt buyers can be extremely aggressive in their collection tactics. Even those with a collection agency license. Collection agencies are strictly regulated by The Fair Debt Collection Practices Act (FDCPA). 

Here are some of the actions that they are forbidden to do:

  • Use the Telephone to Annoy or Harass
  • Threaten Arrest
  • Use Abusive or Threatening Language
  • Contact a relative, friend, or colleague who does not own the debt
  • Call at an unreasonable time such as before 8:00 AM or after 9:00 PM
  • Contact a Consumer at Work
  • Seek Unjustifiable Amounts

Avoid future contact by sending a cease and desist letter to the collection agency.

If you think that your rights were violated under the FDCPA, file a complaint with the CFPB, the BBB, or your state attorney general. Also, consult with a consumer rights attorney in your area. Discuss possibly filing a lawsuit against the collection agency; not only could it result in the cancellation of your debt, but you could be awarded damages.

How to deal with a lawsuit from a collection agency

If your debt is in collections and the creditor feels that you have the means to pay, then they may pursue a lawsuit against you. If they succeed, then they will pursue all legal remedies, including wage garnishments, bank levies, and liens on personal property.

The debt collector can not make idle threats to sue you: However, if they are planning on suing you, they can mention that in a call. If the agency feels that you have the means to pay or disregard their attempts to collect, they often file lawsuits against you. A frequent tactic is to file a lawsuit just before the statute of limitations expires. Once they get a judgment, they can continue to attempt to collect.

If a collection agency files a lawsuit against you, consult with a lawyer in your state with consumer law experience. You must file an answer to their summons and complaint or risk losing the lawsuit by default. 

How to deal with a collection agency on your credit report?

Negative tradelines stay on your credit report for seven years from the delinquency date. Bankruptcies remain for ten years, and judgments can stay for even longer if the creditor renews them.

Inaccurate items appear for many reasons, including clerical errors and identity theft. Suppose you see an incorrect item with the name of an unfamiliar collection agency or a company. In that case, it is possible to file a dispute with the Credit Reporting Agencies. Most agencies like Experian, TransUnion, and Equifax have online dispute forms.

Frequently Asked Questions

Can a collection agency report to credit bureaus if you are making payments?


Yes; they can. Once a collection agency has your account, it can add a tradeline to your credit report like any other creditor. Any payments that you make to the collection agency can appear under this new tradeline. The collection agency applies any payment you make to your balance. When the balance is zero, the agency reports your account paid. 

Can I pay a company directly instead of a collection agency?


You may be able to pay your original creditor instead of a third party. It depends on the amount of time that’s passed and the arrangement with the collector. If the account has been charged off and sold to a debt buyer, you have to pay the owner of the debt – the buyer. 

But if the account has recently been turned over to collections, you might be able to work with your original creditor. It can’t hurt to ask your creditor to take the debt out of collections and put you on a payment plan. 

It’s important to establish who owns the debt before you pay anyone. If an original creditor has sold the debt, the debt buyer is not likely to give you credit for anything you pay the original creditor. 

Can a collection agency scam you?


Not legally. As a debtor, you have rights, even if you do owe the money. But while there are many legitimate debt collectors, there are also scammers who try to trick you into paying debts that you don’t owe. Here are signs of a debt collector scam according to the Consumer Financial Protection Bureau:

  • They pressure you to pay with prepaid gift cards or money transfers.

  • They threaten to tell your family, friends, or employer.

  • They threaten jail time or pretend to work for the government. 

  • You can’t see who they work for or if they have a collection agency license.

  • They demand private, personal information.

  • They call at inconvenient times.

  • You don’t recognize the debt and they can’t prove you owe it.

Dealing with debt

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in District of Columbia, 22% have any kind of debt in collections and the median debt in collections is $1672. Medical debt is common and 6% have that in collections. The median medical debt in collections is $599.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.