What Is Debt Collection?

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Debt collection is what happens when you fall far enough behind on your required payments, especially credit cards, and creditors bring in a third-party agency to recover what you owe.

Debt collection occurs when no payment has been made for 90-180 days, despite contacts from the creditor. If you have been contacted by a debt collector, don’t ignore them.

Debt collection can happen, even if the debt is not yours. If you co-signed a loan for someone who hasn’t made payments, expect frequent phone calls, letters and other forms of communication trying to get you to pay up.

It’s unpleasant, to say the least. But knowing what debt collectors can and can’t do will make it less of a nightmare.

Examples of Debts Pursued by Debt Collection Agencies

All sorts of debt can be pursued by debt collectors, including (but not limited to) the following:

What Does a Debt Collector Do?

At its simplest, debt collectors let people know that they are behind in their debts and try to get them to pay. Presumably, except for co-signers, the debtors are aware that they are behind, though they may have underestimated how far behind until the collector comes calling. And call they do – and send letters, emails, and even social media messages.

How Does Debt Collection Work?

Collection agencies can start pursuing old debt when it is 3-6 months past due. If that’s you, the process will start with written notices and phone calls from your creditor asking you to get the account up to date. If that doesn’t work, the creditor brings in a debt collector.

Debt collectors will contact you using any information they have – your current work or home phone numbers, your address, even contacting your relatives. If possible, they’ll access your financial information, including savings and investment accounts, to determine if you are able to pay off the debt. In some states, they may garnish your wages.

There are, however, rules they must follow.

Consumer Protection and Regulations

Federal and state regulations are designed to protect consumers from predatory or unethical collection practices. It’s important to know your rights with debt collectors.

While unscrupulous agencies exist, law-abiding agencies will send letters to the address on file with your creditor. Whether they write or call, agencies must give you certain information about your debt:

  • The name of the original creditor.
  • How much you owe (including late fees and other charges).
  • How you can contest the debt in question, along with stipulations. You have 30 days to dispute the debt in writing. If you ask, the debt collector must tell you the name and address of the original creditor, any account number associated with the debt, the amount of the debt, information on your rights as a debtor and how you can dispute the debt if you believe it is inaccurate. If you don’t contest the debt within 30 days, the agency deems your debt to be valid and will keep contacting you to collect it.

The Fair Debt Collection Practices Act (FDCPA)

The FDCPA protects consumers from unethical or illegal practices by debt collectors. The FDCPA outlaws debt collectors from using include the following practices:

  • Pretending to be an attorney, law enforcement officer or anyone other than a debt collector.
  • Lying about the debt, including making false claims about where it came from or that the consumer owes more than is actually owed.
  • Seizing assets without the approval of a court.
  • Using deceptive or abusive practices, including threatening to have consumers arrested.
  • Contacting debtors before 8 a.m. or after 9 p.m. (although there can be multiple calls between those hours).

If a debt collector has crossed the line into harassment, your options include filing a complaint with the Consumer Financial Protection Bureau, the Federal Trade Commission or your state’s attorney general. If the debt collector has engaged in deceptive practices, the FDCPA allows you to sue in federal court, and if you win, the collector is on the hook for your attorney fees and possibly damages.

It also is possible to stop debt collection calls, particularly if they’ve been abusive or otherwise breaking the rules.

How to Deal with a Debt in Collections

If you’re the target of debt collectors, you need a game plan. Here are four steps to take.

Step 1: Verify the Debt Is Yours

Creditors aren’t infallible. There may be a mistake in their records. The FDCPA requires debt collection agencies to send you a debt validation letter before you pay anything. This allows you to confirm if the debt actually belongs to you. You have 30 days to dispute any errors.

If your records aren’t organized well enough for you to know whether there are any errors, there’s a way to find out all your debts by contacting one of the three credit bureaus: Equifax, Experian and Transunion.

Step 2: Assess Your Payment Options

Typically, there are two repayment options: a lump sum payment of the remaining balance or a repayment plan. Of course, if you had that much money sitting around, you probably wouldn’t have gotten behind on your debt in the first place.

Then again, there’s a possibility you can do this through debt settlement. Sometimes, creditors are willing to take less than what is owed – maybe half as much – to get the debt off the books. For-profit debt settlement companies negotiate with creditors seeking to settle for less, making money on a fee that you pay them. During the process, you quit paying your creditors, instead paying into an escrow account with the company while it negotiates. The company takes its fee from those payments, and when the escrow account reaches the negotiated amount, the debt settlement company pays off the creditor. This usually takes 2-3 years. It’s not without risks: Your credit score will sink while the creditor isn’t being paid, and consumers often drop out of the agreement without their debts being settled.

A repayment plan is an option if it can fit within your budget – and if you don’t already have one, you need to create a budget so you can make the most effective use of your money. You might be able to negotiate a repayment plan with your creditor for less than you owe.

Step 3: Ask for a Written Agreement from Your Creditor

If you do negotiate with debt collectors and get a repayment plan, insist on a written agreement, and check it closely to make sure it’s accurate before you start making payments.

Step 4: Make Payments

Once you start paying, contact the creditor to make sure they received the payments and keep a record of each payment you make.

Debt Collectors and Your Credit Score

The cost of falling behind on your debt payments is more than just late fees and accrued interest. Creditors can report nonpayment to the credit bureaus, which will affect your credit score and make it harder and more expensive to get future loans. Being in collections can remain on your credit report for as long as seven years. If it doesn’t drop off after seven years, contact the credit bureaus to have it removed.

One exception is medical debt. The three credit bureaus have announced that, starting July 1, medical collection debt that has been paid off won’t appear on your credit report. If your credit report currently has such debt, it will be removed at that time. Also, medical collection debt of $500 or less will no longer appear on credit reports.

Talk to a Credit Counselor About Your Debt

Like most things, dealing with debt collectors isn’t a one-size-fits-all proposition. You may feel you need some expert advice. The good news is that it’s available, and it costs you nothing.

Credit counseling from a nonprofit agency like InCharge Debt Solutions helps you evaluate your finances and identify debt relief programs. A 30-minute interview with a certified counselor will lead to a plan that will help you regain control of your financial situation. If you enroll in a debt management program, this counseling can help end the distracting phone calls from debt collectors, as well as stop wage garnishments. Credit counseling also can help you craft a budget and provide other tools to help you make the best credit decision. For convenience, online credit counseling is also an option.

It could be the beginning of a life free from debt collectors. You might learn to enjoy the sound of the phone not ringing.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


  1. N.A. (2023, March) Debt Collection FAQs. Retrieved from https://consumer.ftc.gov/articles/debt-collection-faqs
  2. N.A. (2022, September 14) What should I do when a debt collector contacts me? Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-when-a-debt-collector-contacts-me-en-1695/