What Happens to Assigned Debt Collection?

Assigned debts are loan accounts a credit card company or other lender closed for nonpayment. Although standards vary, most credit card companies close accounts after the accounts are six months past due. Lenders list closed accounts as a charge-off -- a business accounting term indicating delinquency and closure of the account. After charge-off, lenders often assign accounts to debt collectors who attempt to collect in full.

Process

Most debt collectors work on commission, meaning they earn money only by collecting the debt or a portion of it. Some assigned debts move from one debt collection agency to another, as some debt collectors give up on a specific debt and return it to the original creditor. At that point the original creditor usually assigns the debt to another agency.

Notice

Debt collectors accepting an assignment must send a written notice to the debtor indicating the status of the account. The letter is a requirement under the terms of the Fair Debt Collections Practice Act, a federal law. In the letter the debt collector states the name of the original creditor, the account number and the balance. The letter demands payment in full. The letter signals an official start of the debt collection process on the debt by a specific debt collector. Original creditors can assign a debt to only one collection agency at a time. A new agency picking up the debt must also send a written notice to the debtor.

Disputes

The Fair Debt Collection Practices Act also gives debtors a right to a debt collector's right to collect on a specific debt. After receiving written notice from the debt collect the debtor has 30 days to write back and demand that the debt collector show proof of the assignment by sending a copy of a billing statement or the original credit application. The law exists to keep dishonest debt collectors from illegally collecting on accounts.

Considerations

Some debt collectors purchase debts from the original creditor. The debt collections process works the same as in an assignment, but the debt collector owns the debt and can keep all the money he collects. Debt collectors who buy debts must abide by the same rules as debt collectors who accept assignments.