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 me? 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.
Thank you for your question about dealing with debt and credit card assignment by your original lender.
The short answer to your question is that in most cases creditors can assign their lending rights to a third party. No matter who holds on to the debt, it is crucial to take actions and find the most appropriate debt consolidation program. There are credit card consolidation programs structured for people in financial hardship.
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:
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, two quarterbacks, like Aaron Rodgers and Tom Brady are starting quarterbacks employed by NFL franchises. Both are skilled players and have incredible records. However, Rodgers would not be able to assign his Green Bay Packers contract to Brady. Nor would Brady be able to assign his New England Patriot 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 require some skill and training, but house painting does not need 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.
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.
You mentioned that 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. In the off chance that 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.
You mention that you are delinquent in your credit card payments. Is this due to a temporary or more permanent financial hardship? Do you have assets, such as a home to help you consolidate your debt and create affordable monthly payments? If you are already delinquent, then most likely your credit score has already been damaged.
As concerned as you are about credit card assignment, your primary concern should be finding the best way to deal with your debt. Check out Bills.com innovative debt took, the Debt Navigator. It will help you find the most appropriate debt relief solution for your credit card debt, including various credit card consolidation programs.