If I Don’t Pay Up What Can A Collections Company Do?
There are two useful tools that a collection company can actually do that a debtor should be worried about. These include reporting negative information to credit bureaus, and the less likely probability of a lawsuit.
3rd party collection companies have the ability to report a debt to one or more of the credit bureaus, as a “Collection Account,” including the amount, and whether it was paid or continues to be unpaid. Paying off a collection account won’t result in the item being taken off of a consumer’s credit reports – it will only be marked “Paid in full.”
Collection companies can report debts that they have purchased as well as debts that they are working on contingency. Also, a collection company may request a debtor’s credit report, in order to get an idea of his/her general financial situation, and to get an updated address and phone number.
Collection accounts are subject to the normal 7 year time limit for appearing on a credit report. As specified in Section 605 of the FCRA this time limit is based on the date of the original delinquency. If the debt still belongs to the original creditor, a third-party collection company cannot file a lawsuit. But if the balance is large, the debtor is being resistant, and if there are indications that the debtor has vulnerable assets, the agency may send the account back to the creditor with a recommendation to sue. Each creditor has its own criteria for the decision; for example, the amount must be substantial (often $1500 or more, at the very least.)
Collection companies want to avoid sending too many accounts back, since it suggests that they aren’t very good at collecting. Letters and telephone calls are much less expensive than going to court. If an agency has in fact purchased a debt, then they have the authority to take the debtor to court, but by that time, the debt most likely rather old, and the agency doesn’t have much invested in it. Fear and intimidation are a collectors cheapest tools, since those things can work much more quickly, cheaply, and efficiently than filing suit.
Mallory Megan works for a collections agency that works with a debt collection lawyer. She also writes stories on business and finance, consumer spending and collections agencies. You are welcome to reprint this article – but get your own unique content version here.
