What Is a Debt Collector?

Debt Collectors Explained

A man talks to a debt collector.
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A debt collector is a person or company that collects payments for past-due accounts. They may be hired by a business or buy debt from other companies.

Learn what debt collectors can and cannot do, and what debt collection means for you.

Definition and Examples of a Debt Collector

A debt collector is a person or agency who collects payment for overdue debt. They work on behalf of the lender or business that you owe money to.

It's often more cost-effective for companies to hire debt collectors than to continue to spend their own time and money to try to get you to pay. Many businesses work with debt collectors, such as:

  • Medical offices
  • Credit card companies
  • Utilities
  • Phone companies
  • Loan servicers
  • Other businesses

Debt collectors also include “debt buyers” that buy up past-due debts and try to collect on them.

Usually, a business will try to contact you for several weeks or months to get you to pay your debt. If you do not, that's when the account gets sent to debt collection.

Debt collectors generate more fraud alerts to the Federal Trade Commission (FTC) than any other industry. That's because few people have good experiences dealing with debt collectors.

How Do Debt Collectors Work?

When an account gets sent to a debt collector depends on the business. If you look at your credit card or loan agreement, this can give you an idea of your creditor's timeline.

Many credit card accounts are sent to a collection agency after a few months of non-payment. Others may send accounts to collections agencies after just a month or two or missed payments.

When they're trying to get you to pay your debt, debt collectors will:

  • Call you
  • Send letters
  • Notify the credit bureaus of the collection account

By law, debt collectors must follow the Fair Debt Collection Practices Act (FDCPA) when they're collecting a debt from you. The thousands of complaints made against debt collectors each year, though, prove that they don't always follow the law.

The FDCPA doesn't usually apply to the original creditor, except when the creditor uses a different company name for its in-house debt collectors.

When and Where Can Collection Agencies Call?

Debt collectors can only call you from 8 a.m. and 9 p.m. your local time. They're allowed to call several times a day. But they are not allowed to call you over and over to “annoy, abuse, or harass” you.

If they have your work phone number, debt collectors may even call you on the job. You have the right to stop this, though, by letting them know your employer doesn't approve of those calls.

Some collectors have been known to show up at a person's home to collect a debt. You may be surprised to know that's legal. Debt collectors can call your personal number if you gave the number to your creditor to contact you.

The Consumer Financial Protection Bureau’s latest rules allow debt collectors to text or email you. But they must include clear opt-out instructions when they do.

Who Can Debt Collectors Contact?

When a debt collector has a hard time reaching you, they may call your friends or neighbors. They may ask those people to verify the contact information for you.

They're allowed to do this, but they're not allowed to reveal that they're collecting a debt. Most often, they can't contact the same person more than once.

What Notices Must Debt Collectors Provide?

Debt collectors will send payment notices to the address they have on file for you. In their first bill, they have to notify you that you have 30 days to request validation for the debt. This forces the debt collector to provide proof that you owe the debt.

By law, the debt collector has five days from its first contact with you to notify you of the debt amount, who you owe the money to, and that you have 30 days to ask the collector to validate the debt.

The debt validation notice may also be given to you over the phone. This should happen if a phone call is the first time the collector contacts you.

If they don't have the correct address, you may never receive a notice of the debt. And if the collector doesn't have your correct phone number or address, you may not find out about the account until you see it listed on your credit report.

What It Means for You

When a creditor or lender sends an account to a debt collector, the collector can send your account information to a credit bureau. The creditor doesn't have to tell you that your account is being sent to collections.

The debt collector, though, does have to notify you that they are collecting the debt. They must do this before they can take any action.

A collection account may appear on one or all three of your credit reports depending on which credit bureaus the debt collector works with.

Having a debt collector reporting an account to a credit bureau can lower your credit score. This will make it harder to get a credit card or loan. It can also make it harder to open a utility account or rent an apartment.

Correct debt collection accounts can stay on your credit report for up to seven years from the date of your first missed payment. If your credit report contains a collection that doesn't belong to you, you can have it removed by disputing it with the credit bureau.

Paid collections may look better to some lenders when you apply for a loan. But your credit score won't improve right away once you've paid a debt collector.

As time passes, the collection account will affect your credit less. Continuing to pay all your other bills on time will also help your credit score recover from a debt collection. After seven years, it should fall off your credit report.

Key Takeaways

  • A debt collector is a person or company that collects payments on past-due accounts. 
  • They may be hired by a business or buy the debt outright.
  • Legally, debt collectors can call, text, or email you, as well as send letters. They will also notify the credit bureaus of the collection account.
  • You have the right to dispute the debt, and the debt collector can't keep trying to collect it until they provide proof that it belongs to you.
  • A debt collection will remain on your credit report for seven year and will hurt your credit score.