Can Bills Go to Collection Without a Written Letter?

Credit card accounts and other bills are assigned to collections teams after becoming past due. Procedures vary depending on the lender, with mortgage companies and auto lenders usually placing accounts in collections after just one missed payment. A credit card company may make the move after two or three missed payments. No formal, written notice is necessary, regardless of the timing.

Default

Technically, people default on loans after missing one payment, with increased collection efforts available immediately. The first step in the collections process is usually assignment to an internal collections team. Missing even one payment is a serious issue and hurts credit. However, more serious consequences -- such as foreclosure, repossession or a debt lawsuit -- are usually not an issue at this point. The internal collection teams will begin calling about the bill, with increased contact as the account becomes two months past due.

Charge-Off

If the delinquency continues, the creditor may close the account and list it as charged off. No written notice is necessary when the creditor takes this action. A charge-off is an internal accounting term indicating the account is closed because of nonpayment. Charge-offs are very bad for credit ratings, often making new credit at favorable rates difficult or impossible to obtain for a while. Some mortgage companies will not approve applications for candidates with unpaid charge-offs. A charge-off does not end responsibility for the debt, however.

Time Line

Charge-offs for credit cards generally occur after accounts are six months behind. However, the lender may close the account before the charge-off. For example, some foreclosures take place before the mortgage account is listed internally as charged off. Although formal notices are not required, most creditors do send reminder notices and letters informing customers of account statuses.

Debt Collectors

Accounts such as credit cards are usually sold to an outside debt collection agency after six months. A collection agency taking on the account is required to provide written notice of the placement. The letter explains that the debt collector is authorized to collect the entire amount due. By law, notification of legal rights must also appear in the letter, including advising that the debtor can dispute the debt collector's right to collect. The Fair Debt Collection Practices Act, a federal law, gives the debtor 30 days to challenge the debt collector in writing. The debtor can demand that the debt collector verify the debt by providing proof of the assignment, such as a copy of the last billing statement. By law, collection efforts must end until the debt collector provides proof.