What Is My Obligation If My Bill Is Sold to a Collection Agency?

Consumers may look upon debt collectors as nothing more than an annoyance. Some people may assume they have more of an obligation to repay a creditor than a collector. However, debt obligations generally are the same no matter who is collecting a debt. Consumers who don't deal with the debts they owe are in for lengthy credit problems.

Creditor Collections

A collection agency sometimes only represents a creditor, which means the creditor hasn't sold the debt. A consumer can't always tell if a collection agency has bought a debt, especially when a company hires an outside agency instead of doing its own collections in-house. You may need to contact your creditor to find out the status of your debt. In any case, consumers are obligated to repay the debts they accumulate even if a debt has been sold to a collection agency.

Charge-Offs

Sometimes debts become charge-offs because the original creditor classifies the unpaid amount as bad debt and stops efforts to collect it. However, that doesn't mean a consumer is no longer obligated to repay the debt. Charged-off debts are often bought by collection agencies who profit by collecting as much of the unpaid debt as possible. In such cases, the collection agency owns the debt. People who still don't pay a charged-off debt may find themselves caught up in a debt-collection cycle. That's because the collection agency that bought the debt may sell it to another agency if it can't collect on it. Ultimately, agencies may resell a debt several times.

Credit Reporting

A collection agency that buys your debt also gains the right to report your payment activity to credit bureaus, so it's important to send payments on time. For example, collectors can report late payments to credit bureaus if consumers work out payment arrangements with them and then don't pay off their accounts as agreed. The collector also reports to a credit bureau when a consumer pays off a delinquent account.

Considerations

Collection accounts generally appear in consumer credit files for seven years, even if people pay off their account balances. Experian and other credit bureaus delete delinquent accounts from credit files seven years after creditors first report the accounts as delinquent. Consumers don't have to put up with abusive collection practices, despite their obligation to pay their debts. The U.S. Fair Debt Collection Practices Act prevents collectors from using threats of violence to collect debts or falsely claiming a consumer has committed a crime by not paying a debt.