Debt collector

What It Means

A debt collector is a person or business that collects debtsLiabilitiesDebts and other money you owe, such as a mortgage, a car loan or a credit card balance. Your assets minus your liabilities is your net worth. See more owed to someone else. Under the Fair Debt Collection Practices Act (FDCPA), the CFPB says that can include collection agencies, debt buyers and lawyers who collect debts. The law covers personal, family and household debts such as credit cards, car loansCar loanAn installment loan used to buy a vehicle, repaid in monthly payments over a set term, with the vehicle as collateral. See more, medical billsMedical debtMoney owed for health care, such as hospital, doctor, lab or ambulance bills; unpaid bills can go to collections and, in some cases, onto credit reports. See more, student loansStudent loanMoney borrowed to pay for college or career school, repaid with interest after you leave school; it comes from the federal government or a private lender. See more and mortgagesMortgageA loan used to buy or refinance a home, secured by the home itself and repaid in monthly installments over a set term. See more, but not business debts, and it generally doesn't cover the original lender collecting its own debt. Regulation F, the CFPB's debt collection rule, spells out what collectors may and may not do.

How People Say It

• "A collection agency keeps calling about a bill I've never heard of."
• "They called five times today."
• "Send it in writing so you have a record."

The Breakdown

A short example. Ana gets a call from a company saying she owes $1,400 on an old medical bill. The caller is pushy and asks for her bank account number to settle it today. She doesn't recognize the company or the amount.

Where it goes wrong. Paying over the phone on the first call skips every protection she has. The FTC advises not sharing personal or financial information until you've received validation information or already know the collector, partly because fake collectors make exactly this kind of call. A real collector has to give her validation information, the creditor's name and an itemized amount, in its first contact or within five days after it.

What to watch for

• The validation noticeDebt validation letterEither the notice a debt collector must send listing the debt and your rights, or the letter you send back disputing it or asking for proof. See more, and your 30 days after getting it to dispute the debt in writing.
• Calls before 8 a.m. or after 9 p.m., calls at work after you've said you can't take them there, and more than seven calls in seven days about one debt.
• Threats, profanity, claims to be a lawyer or the government, or talk of arrest. The FTC lists all of these as off limits.
• A letter asking the collector to stop contacting you. Keep a copy, and consider certified mail with a return receipt.
• Court papers. If you're sued, respond by the date on them.

Good to Know

Once a collector receives your letter asking it to stop, the FTC says it may only contact you to confirm it will stop or to tell you about a specific step it plans to take, such as filing a lawsuit. Stopping contact doesn't cancel the debt, and the collector can still sue within your state's time limit. If a collector is chasing more than one debt, it must apply your payment to the debt you choose. Before reporting a debt to a credit bureauCredit bureauA company that collects information about how people use credit and sells it as credit reports; Equifax, Experian and TransUnion are the three nationwide ones. See more, the FTC says a collector must talk with you about it or send you a letter or electronic message and wait a reasonable time, usually 14 days, in case it comes back undeliverable.

Related Terms and Categories

• Debt validation letter

  Either the notice a debt collector must send listing the debt and your rights, or the letter you send back disputing it or asking for proof.

• Statute of limitations on debt

  The state-set time limit for a creditor or collector to sue you over an unpaid debt; after it passes, the debt is called time-barred.

• Charge-off

  When a lender writes an unpaid account off as a loss and closes it; you still owe the money, and the mark can stay on your credit report for up to seven years.

• Medical debt

  Money owed for health care, such as hospital, doctor, lab or ambulance bills; unpaid bills can go to collections and, in some cases, onto credit reports.

• Delinquency

  Being behind on a required payment; in credit reporting, an account becomes a reported delinquency once a payment is at least 30 days past due.

• Credit report

  A record of how you've borrowed and repaid, kept by credit bureaus and sold to lenders, landlords, insurers and others who decide whether to deal with you.

Debt and credit