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What Happens if You Don’t Pay a Collection Agency?

what happens if you don't pay a collection agency

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Carrying a lot of debt is heavier than you think. If you’re skipping out on payments or missed bills, your past-due debt could go into collections. That’s when the calls start to come.

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Ignoring the calls, texts, and letters will only go so far. What happens if you don’t pay a collection agency? Here’s what to expect and how you can avoid it.

How Collection Agencies Operate

If you go long enough without paying your outstanding debt, your original creditor may sell or assign your debt to a collection agency. Sometimes, those agencies work in-house with the original creditor. Sometimes, they are third-party debt collection agencies or debt collection law firms. 

Collection agencies can buy your outstanding debt from the creditor. Alternatively, they can be assigned to collect the debt for the original creditor. Either way, they aim to get you to pay the outstanding balance they claim you owe for the debt. These could be anything from old medical bills to student loans or credit card debt. Protections exist so you don’t face harassment or get scammed. Remember, however, that collection agencies still have a right to contact you to collect a debt.

Once your debt goes to a collection agency, you’ll start receiving notices about your debt. It might look unfamiliar since it’s coming from an agency rather than the original creditor. Because of this, you may get skeptical of the attempt to collect your debt. The collection agency’s job is to clearly state the outstanding debt they’re looking to collect. They must also state how you’re involved in it. The letter should have the original creditor’s name on it, too. The letter should also have account numbers, balances, and contact information so you can verify the debt.

Consequences of Not Paying Collection Agencies

Increase in Debt balance Due to Interest and Fees

Collection agencies can’t independently increase the interest you owe on an outstanding debt. They can, however, enforce what was already agreed upon in your original loan agreement, or it’s allowed by state law.

Your state or original creditor agreement might allow the collection agency to add interest and tack on fees. This means you’ll pay even more than you originally borrowed or owed.

Damage to Credit Score

Payment history is the biggest determining factor in calculating your credit score, whether your FICO score or VantageScore. The more on-time payments you have, the more your credit score can improve. Even one late payment can cause your credit score to tank. The longer you miss payments and the more missed payments you have, the lower your credit score goes. 

A low credit score can be detrimental to getting new lines of credit or loans. This includes credit cards or auto loans. Outstanding payments can keep your credit score low and stay on your credit history for upwards of a decade. This means potential lenders could reject you from borrowing in the future when they go through the major credit bureaus to review your credit report.

You can’t be arrested for an unpaid debt or even be threatened with arrest by a debt collector. This is thanks to the Fair Debt Collection Practices Act (FDCPA). However, through their attorneys, the debt collection agency can file a lawsuit to get the court to order you to pay the outstanding debt. According to the Consumer Financial Protection Bureau (CFPB), if you fail to appear in court or fail to provide the court with certain information, a judge could issue a warrant for your arrest. This is rare but can happen. Hiring a debt relief attorney who is well-versed in debt collection laws and appearing in court for debt collection-related lawsuits is advisable.

Understanding Your Rights

A few laws and regulations are in place to protect consumers from collection agencies. This includes the FDCPA and understanding time-barred debt.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act, or FDCPA, is one of the most important consumer protection laws. Its main purpose is to govern and regulate collection agencies attempting to collect outstanding consumer debts. The act has a few main functions, including:

  • It limits contact options. Debt collectors can only contact you during regular hours of the day. For the most part, you can only be contacted between 9 p.m. and 8 a.m. if you permit them to do so. They’re not allowed to contact you at work or use social media to get a hold of you if you’ve asked them to stop contacting you there. If a debt collector reaches you through phone calls, text, or social channels, they must have easily accessible ways for you to opt out of those messages.
  • Barring harassment. Collection agencies are prohibited from threatening you, your family, your workplace, or anyone else in an attempt to collect a debt. It’s against federal law to use abusive or deceptive practices to collect debt. Remember that collection agencies can garnish your wages and take money directly from your bank account, but they need to first sue to get a court order. Not all states allow wage garnishment, but yours might.
  • Contacting your lawyer. Once the collection law firm knows a lawyer represents you, they must stop communicating with you and move all communication to your attorney. This is only applicable if you have an attorney representing you about the debt, so if you’re representing yourself, they can still contact you to attempt to collect the debt.

Time-Barred Debt

There is a limit to how long a debt collector can come after you to collect an old debt. This period is the statute of limitations, and every state has a different restriction when attempting to collect an outstanding debt, usually 3 to 10 years. Then, the debt becomes time-barred from suit.

Time-barred means that once the statute of limitations runs out, debt collectors can no longer attempt to sue you to pay an outstanding debt. In some states, you might still get contacted about old debt, but if it’s time-barred, you won’t get sued. It can still be on your credit report.

If you need clarification on whether your debt is time-barred, ask the collection agency about the debt they’re looking to collect. Make sure you are careful what you say or do. You could inadvertently restart the statute of collections, which restarts the clock on your debt. This leaves the collection agency the option to attempt a lawsuit to get you to pay your outstanding debt. Instead, request any letter or paperwork detailing the old debt. Then check to see the statute of limitations where you live. 

How to Deal with Collection Agencies

Not all debt collection agencies operate the same way. If you’re getting calls or texts from a debt collector, ensure you know how to deal with them and avoid harassment or predatory collection agencies.

  1. Ask about the debt. While there’s a chance the debt is yours, there’s a chance it’s not yours, either. Ask about the original creditor, the collection account, the outstanding amount, any interest rates or fees you must pay, and how long the original debt took place. Also, get the name of anyone you spoke to. Write down the day and time you talked to them, the name of the collection agency, and a mailing address. Start to keep a paper trail.
  2. Request it in writing. Even if the collection agency tells you all the details about your outstanding debt over the phone, you can request a written debt validation letter that outlines the information about the debt and your rights as it’s in collections.
  3. Figure out the next steps. While you have every right to ignore collection agencies, you can also mail in a request that they stop contacting you. You can also require a return receipt to ensure they received your letter. After that, you’ll only get correspondence if they plan to take any legal action (which they can do, as long as the debt isn’t time-barred). If you get a debt relief lawyer to assist you, all contact must go through them. If you’re working out a repayment plan — whether you plan for a debt settlement for less than you owe, a payment plan, or the full amount — it’s important to talk with the debt collection agency in some form to work out a deal that works within your budget.

If you’re facing a debt scam, old debt being collected, or getting harassed by debt collectors, you can contact your state’s attorney general’s office for help.

The Bottom Line

Dealing with debt collection agencies takes a lot of work. While debt collectors have some rights to get the money they’re owed, knowing your rights as a consumer is important to avoid scams and harassment.

Regardless of where you are in the collection process, you can call today for free at (866) 890-7337 or fill out our short contact form. We’ll respond as soon as possible. All conversations are confidential, and we never share or sell your information.

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