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Your guide to debt collection

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

According to the Federal Reserve Bank, consumer debt in the United States rose to a whopping $17.29 trillion in Q3 2023. While the number of debt accounts in collections is falling, the amount of debt is rising. Studies show that the average debt account now exceeds $1,600, compared to $1,200 in 2022.

If you’re one of the many Americans dealing with debt collection, understanding your rights and options is the first step to ensuring financial freedom. Keep reading to learn more about debt collection laws and how they might impact you.

Your legal rights against debt collectors

To protect yourself from debt collectors, it’s important to understand the various collectios laws protecting your rights. Fortunately, there are many rules and regulations to limit the powers debt collectors have. Below is a look at the most common laws that help protect consumers.

FDCPA

U.S. lawmakers enacted the Fair Debt Collection Practices Act in 1977 to protect consumers from debt collectors’ abusive, deceptive and unethical practices. This law protects consumers in several areas, including:

Prohibiting debt collectors from engaging in harassment or abusive behavior, including calling excessively or outside of normal times
Requiring debt collectors to disclose that they’re contacting you in an attempt to collect on a debt
Giving you the right to ask any debt collector to stop contacting you—they must abide by your written request, but that doesn’t mean you stop owing the debt
Forcing debt collectors to provide validation of your debt upon request
Forbidding debt collectors from violating your privacy and discussing your debt with others
Banning debt collectors from posting information about your debt on any public social media post

FCRA

The Fair Credit Reporting Act helps protect you from other types of abusive actions by debt collectors. Specifically, this law mandates fair and accurate credit reporting. If you find a potential error on your credit report, you can write to the bureau in question and ask them to investigate it. By law, they have to investigate, and if the reporting creditor or collection agency can’t prove those facts, the bureau has to delete or correct the information.

The FCRA also gives you the right to at least one free credit report per year from each credit reporting agency. Plus, you have the right to a copy of your credit report if it’s used to evaluate you for credit and you’re denied because of information in your credit file.

UDAP regulations

Unfair or Deceptive Acts or Practices refers generally to behaviors in financial and accounting sectors that aren’t legal or ethical. These rules prohibit debt collectors from misstating the facts of the debt in question, falsely claiming they are attorneys or will have you arrested or collecting debt payments in excess of the amount owed.

How do debt collection agencies work?

Debt collectors may act as the middleman between you and the lender you owe money to, or they may purchase your debt from the lender for a fraction of the cost. Either way, debt collection agencies must abide by all federal laws listed above as well as any state regulations.

While these collection laws are put in place to protect consumers from aggressive and unethical behavior by debt collectors, they don’t eliminate the amount of debt you owe. You’re still liable for paying your debts, and debt collectors can use a variety of tactics to try to collect this money.

When can a debt be sent to collections?

Technically, a debt can go into collections as soon as you fail to make a payment on time. However, each lender has its own set of standards for the exact timeline it uses to send debt to collections. In some cases, you may be able to prevent this from happening by talking to your lender and making alternative payment arrangements.

What is the statute of limitations on debt?

The statute of limitations on debt dictates how long a creditor or collection agency can attempt to collect through legal means, including filing a lawsuit. The timeline varies by state and usually starts when you first default. In some cases, you can reset the statute of limitations by making payments on old debt, so this is something to be aware of when dealing with collectors.

How can debt collection agencies attempt to contact you?

Debt collection laws limit how and when debt collectors can contact you. These agencies can’t call certain workplaces, and they can’t continue to call you at your workplace if you tell them to stop. They also can’t send you emails through a known work email address or post information about your debt on social media.

Debt collectors can use several forms of communication, including phone, email, fax, mail and private social media messages. Additionally, debt collection laws only allow debt collectors to call between the hours of 8 a.m. and 9 p.m.

What to do when a debt collector contacts you

The actions you take when a debt collector contacts you could have long-lasting effects. While ignoring a collection agency may seem like a good option, it doesn’t make the debt go away and can lead to even more stress down the road.

Here are some steps to take if a debt collector contacts you:

Ask the debt collector to verify the debt in writing. This is a legal requirement and can help you ensure it’s actually a debt you owe and not a scam. Then, you should review the information about the debt to make sure it’s accurate
If possible, paying off the debt as soon as possible may be the best solution for you. However, be sure to double-check that all the information is correct and you do actually owe this debt before making any payments.
If you want to dispute the debt or the amount of debt you owe, gather any documentation you have that helps prove your case, such as old statements, canceled checks or emails.
If you get a summons to go to court, make sure you show up. Failure to attend this hearing will automatically award the collection agency the amount owed.
Instead of skipping court, seek out legal representation as quickly as possible. An attorney can help protect your rights in court and possibly help reach an agreement with the debt collection agency.

How to report illegal debt collection behavior

If a debt collector violates any of the debt collection laws discussed above, you can and should file a complaint. There are several agencies where you can file these types of complaints, and depending on the situation, you might even file a complaint with more than one.

You can report a debt collector to:

What to do if you can’t pay the amount in collections

There’s a good chance that your debt went into collections because you didn’t have enough funds to pay the balance due. If this was your situation and you still can’t afford to pay your debt, there are several things you can do, including:

Pursue debt settlement

You may be able to pay your balance due to the collection agency through debt settlement. Often, debt collectors are willing to take a lower payment just to be sure they receive something. You can work with the debt collection agency to negotiate a deal, but make sure you get everything in writing before making any payments.

File bankruptcy

Bankruptcy should be the last option you consider because an action like this can impact your credit score for up to 10 years. Filing a bankruptcy petition puts an automatic stay in effect so debt collectors can’t continue collection activity. Once complete, your bankruptcy may help eliminate all or a portion of the debt you owe.

Watch your credit during the debt collection process

If you’re dealing with a debt in collections, Lexington Law may be able to help. Find out more about Lexington Law’s credit repair services to find out how you can begin taking positive actions

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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