Collection Agency Basics Part Two: Who They Have To Answer To
In the first article of this series I explained what a collections account was
. It is a delinquent account that typically runs 90 to 120 days late. Late accounts will either be collected by the original creditor itself, or sent out to collection companies. Sending an account out to a collection company benefits the creditor because they can both write the debt off on their taxes and collect profit on the debt owed.
Sometimes old debt will be sold to a third party collection agency who becomes the new creditor. This old debt will be collected or sold to another agency until it is paid or the statute of limitations (usually seven years but it differs by state) runs out. At this point, a third party debt collection company doesn't have the authority to negatively mark your credit score or take legal action against you, but they are legally able to send letters to you and persist with the collection phone calls.
Collection agencies will obtain the following data to coordinate a game plan to collect the debt that they are trying to get: the name and address of the debtor and a record of all correspondence with them, the amount that is owed by the consumer and the date of the last payment. A collection agency has the authority to pull a credit report on a debtor and communicates with the credit bureaus often to keep information current.
All third party collection agencies are governed by Federal (Fair Credit Reporting Act and the Fair Debt Collection Practices Act) and state laws that are generally very strict. They report to the Federal Trade Commission, which tracks statistics and complaints about third party collection agencies.
It is only a very rare instance in which the Federal Trade Commission will become involved in a single complaint about a debt collection company, but if the FTC notices a trend that many people are complaining about the same agency it will look into it.