Collection agencies can call, write, email, and text you about a debt; report it to the credit bureaus; and sue you in court to collect, which opens the door to wage garnishment, bank levies, and property liens. What collection agencies can and cannot do is set mostly by the federal Fair Debt Collection Practices Act and its implementing rule, Regulation F, which hand collectors defined tools while barring harassment, deception, off-hours contact, and threats they can’t legally carry out.
Who the Rules Apply To
The FDCPA governs third-party debt collectors, meaning businesses whose principal purpose is collecting debts owed to someone else, or that regularly collect for others.1Office of the Law Revision Counsel. 15 USC 1692a – Definitions A credit card issuer calling about its own past-due balance generally isn’t covered. Once that account is sold or placed with a collection agency, the full set of federal protections applies. A creditor that uses a fake name to pose as a third party is treated as a collector too.
How and When They Can Contact You
Collectors may use phone, postal mail, email, and text message. They cannot contact you before 8 a.m. or after 9 p.m. in your local time, and they cannot contact you at any time or place they know is inconvenient. They cannot call you at work if they know your employer prohibits it.2Office of the Law Revision Counsel. 15 USC 1692c – Communication in Connection With Debt Collection
Regulation F limits phone attempts to seven per debt in any rolling seven-day period, and once a collector actually speaks with you about a debt, it must wait another seven days before calling again about that same debt.3eCFR. 12 CFR 1006.14 – Harassing, Oppressive, or Abusive Conduct The cap runs per debt, so an agency holding three of your accounts could make up to 21 calls in a week; going over the limit on any one debt creates a presumption of harassment.
Email and text are allowed, but a collector generally needs either your direct consent or confirmation that the original creditor already used that address and gave you a chance to opt out.4Consumer Financial Protection Bureau. 12 CFR 1006.6 – Communications in Connection With Debt Collection Every electronic message has to include a way to opt out.
Making Them Stop
Send a written request telling the collector to stop contacting you, and once it receives that letter, it can only reach out to confirm it is ending contact or to give notice of a specific legal action like a lawsuit.2Office of the Law Revision Counsel. 15 USC 1692c – Communication in Connection With Debt Collection The debt doesn’t go away. Neither does the risk of being sued. The letters and calls just stop.
The Validation Notice and Your Right to Dispute
Within five days of first contacting you, a collector must send a written validation notice stating the amount owed, naming the creditor, and telling you that you have 30 days to dispute the debt in writing.5Office of the Law Revision Counsel. 15 USC 1692g – Validation of Debts If you dispute in writing within those 30 days, the collector must stop all collection activity until it mails you verification of the debt. That pause is a real lever, especially on old accounts that have been sold several times and whose paperwork is thin. Miss the 30-day window and the collector is entitled to treat the debt as valid.
What They Can Report to Credit Bureaus
A collector can report an unpaid account to Equifax, Experian, and TransUnion, and most do. The entry generally stays on your credit report for seven years, measured from 180 days after you first fell behind on the original account.6Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports Selling the debt to a new collector doesn’t reset that clock.
A collector that furnishes information to a bureau can’t report data it knows is inaccurate and has to correct or update information it finds to be wrong. If you dispute the debt directly with the collector, it can’t keep reporting the account without noting the dispute. When a dispute comes through a credit bureau, the collector has to investigate and report back; information that can’t be verified has to come off.7Office of the Law Revision Counsel. 15 USC 1681s-2 – Responsibilities of Furnishers of Information to Consumer Reporting Agencies
Contacting People Around You
If a collector can’t locate you, it may contact relatives, neighbors, or coworkers, but only to confirm your address, phone number, or employer. It must identify itself by name and cannot say you owe a debt. It cannot identify itself as a collection agency unless the person specifically asks. Each third party can generally be contacted only once, and if the collector knows you have a lawyer for the debt, it must deal with the lawyer instead.8Office of the Law Revision Counsel. 15 USC 1692b – Acquisition of Location Information
Suing You
A collector that can’t get paid voluntarily can file a lawsuit. The case has to be brought either where you signed the original contract or where you live when it is filed.9Office of the Law Revision Counsel. 15 USC 1692i – Legal Actions by Debt Collectors You get a summons telling you when to respond. Ignore it and the court will enter a default judgment, usually for the full amount claimed plus court costs and attorney fees. Respond, and the collector has to prove it owns the debt, that the amount is right, and that the statute of limitations has not expired. Many thinly documented accounts don’t survive that test.
What a Judgment Lets Them Do
A money judgment turns a collection account into something the court will help enforce. Three tools matter most.
Wage Garnishment
The collector can serve your employer with a garnishment order that redirects part of your paycheck before you ever receive it. Federal law caps the take at the lesser of 25 percent of your disposable earnings or the amount by which your weekly pay exceeds 30 times the federal minimum wage.10Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment Some states cap it lower. Workers near minimum wage can be fully exempt because their disposable earnings don’t exceed the protected floor.
Bank Levies
A collector can also serve your bank with a levy that freezes and then withdraws money from your account, often with no advance warning. If Social Security, veterans’ benefits, or federal retirement payments are direct-deposited, the bank must automatically protect two months’ worth of those payments from the levy.11National Credit Union Administration. Garnishment of Accounts Containing Federal Benefit Payments Amounts above that protected cushion can still be taken.
Property Liens
The collector can place a lien on real estate and, in some states, on vehicles or other personal property. A lien doesn’t force an immediate sale, but it blocks you from selling or refinancing without clearing the debt first. Most states have a homestead exemption that shields some or all of a home’s equity from judgment creditors, and the amounts vary widely from state to state. Judgments themselves last years and can usually be renewed, so a collector has a long runway to go after assets you acquire later.
Old Debts: What Changes When the Statute Runs
Every debt has a statute of limitations after which a collector cannot sue to collect. The window varies by state and debt type, commonly three to six years from your last payment or activity on the account. Once that clock runs out, the debt is “time-barred.” A collector is barred from suing or threatening to sue on it.12Consumer Financial Protection Bureau. 12 CFR 1006.26 – Collection of Time-Barred Debts It can still call and write asking you to pay. It just can’t use the courts.
Watch the trap: in many states, even a small partial payment on an old debt restarts the statute of limitations, giving the collector a fresh window to sue for the full balance. A written acknowledgment can have the same effect in some places. Before paying anything on an aged account, find out whether the statute has already expired and what actions would restart it.
What Collectors Are Not Allowed to Do
Harassment and Abuse
Collectors cannot use or threaten violence, use obscene language, or call repeatedly to annoy or harass you. They cannot publish your name on a list of people who allegedly won’t pay, and they cannot place calls without identifying who they are.13Office of the Law Revision Counsel. 15 USC 1692d – Harassment or Abuse
False or Misleading Statements
A collector cannot misstate the amount you owe, claim a government affiliation it doesn’t have, or imply that nonpayment leads to arrest. It also cannot threaten any action it doesn’t actually intend to take or legally cannot take, such as a lawsuit it has no plans to file or wage garnishment before any court judgment exists.14Office of the Law Revision Counsel. 15 USC 1692e – False or Misleading Representations Empty legal threats are one of the most common FDCPA violations consumers run into.
Unfair Practices
A collector cannot collect more than you actually owe unless the original contract or state law authorizes extra fees, cannot deposit a post-dated check early, and cannot threaten to seize property it has no legal right to take.
Tax Consequences If a Debt Is Settled
When a collector agrees to accept less than the full balance, the forgiven portion may count as taxable income. If $600 or more is cancelled, the creditor or collector files IRS Form 1099-C and you may owe income tax on the forgiven amount.15Internal Revenue Service. About Form 1099-C, Cancellation of Debt On a $10,000 debt settled for $4,000, that’s $6,000 that may show up on your return. If your total debts exceeded the fair market value of everything you owned when the debt was cancelled, you qualify as “insolvent” and can exclude the forgiven amount up to the extent of that insolvency. Debt discharged in bankruptcy is also excluded. Either exclusion requires filing IRS Form 982.16Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
What You Can Do If They Break the Rules
If a collector violates the FDCPA, you can sue for your actual damages plus up to $1,000 in additional statutory damages, and the collector has to pay your attorney fees and court costs if you win.17Office of the Law Revision Counsel. 15 USC 1692k – Civil Liability That fee-shifting is why consumer attorneys often take these cases on contingency. You can also file complaints with the Consumer Financial Protection Bureau and the Federal Trade Commission, which can take enforcement action against collectors engaged in patterns of illegal behavior. Keep every voicemail, letter, text, and call log. Evidence is what turns a complaint into a case.