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Credit Card Assignment

Can my credit card issuer assign my delinquent account to a collection agent if I don't want it to?

As of 2 days ago I received a notice from Bank of America that they are charging off my credit card. They said they may be sending it to a Collection Agency. How does a Collection Agency have any authority to collect a debt that was never contracted between them and I? My debt was with Bank of America, not a third party agency. How can a Collection Agency have any legal grounds to collect a debt that is only theirs due to their acquiring it by compensating the original creditor? I never agreed to this.

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Highlights

  • Parties can assign the rights to a contract.
  • Narrow exceptions apply to the assignment rule.

In the common law of contracts, it is well established the parties can assign their rights under the contract, unless a narrow set of exceptions apply. These are:

  • The contract states no assignment of rights are allowed
  • The assignment changes either party’s duties in a material manner
  • The assignment changes the element of risk to the parties
  • The assignment impairs either party’s chance to obtain the other's performance

Otherwise, the parties are free to assign their rights under the contract.

You may ask, “Doesn’t assigning my account to a collection agent count as ‘changing either party’s duties in a material manner’?” No. This exception is for so-called personal services contracts where there is a special relationship of trust or confidence between the parties.

For example, both Aaron Rodgers and Jay Cutler are 27-year-old starting quarterbacks employed by NFL franchises. Both are skilled players and have similar heights, weights, and throwing abilities. However, Rodgers would not be able to assign his Green Bay Packers contract to Jay Cutler. Nor would Cutler be able to assign his Chicago Bears contract to Rodgers. Each has a special relationship of trust with their teams. No court would allow either player to assign their contracts (assuming the other player in this example was not under contract).

Contrast this with a house painter. Painting houses requires some skill and training, but house painting does not require a special relationship or special trust between the property owner and the painter. Therefore, a court would probably allow a house painter to assign the rights to paint a house to another painter, and then collect payment.

Assigning Debt and Collection Agents

Back to your question about assigning debt. A delinquent credit card account, which is called a collection account in the trade, is more like house painting than NFL quarterbacking. There is nothing special about a credit card collection account. You and I are just numbers on the screen to our credit card issuers. As special as we might be to our families and friends, our credit card accounts are just rows and columns in a computer database.

Now let us look at a separate but related issue. A creditor has the right to hire a collection agent on a contract basis to act on the creditor’s behalf and pester a delinquent debtor into paying the amount owed. A creditor also has the right to assign its rights to collect the account to a collection agent. As an assignee, it has all of the rights the original creditor had.

The assigned collection account can be bare, or fully documented. A bare account is worth far less than a fully documented account. When an unknown person calls seeking to collect a debt, it is always a good idea to validate the debt.

Your Assignment Questions

You mentioned you never agreed to allow an assignment. Review your contract with the credit card issuer. If the contract is silent on assignments, the presumption is that assignment is allowed. If the contract mentions assignments, then review what you agreed to when you signed the contract. However, if the contract states that assignments are not allowed, then you have no liability to the collection agent or law firm that purchased the rights. However, if the collection agent is only a contractor, then no assignment has been made, and any “no assignments” clause in your credit card contract do not apply.

To learn more about your rights as a debtor, read the Bills.com resource Collections Advice.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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1 Comments

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  • EL
    Jan, 2011
    Eric
    Allouez, WI
    I understand the point you were making about personal service contracts, but I can think of several other reasons why the Green Bay Packers would not want Aaron Rodgers to assign his contract to the likes of Jay Cutler, despite their similarity in age, arm strength, mobility, experience, and attendance at prestigious universities.
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