When a credit card company cannot successfully collect a delinquent debt through calling and sending written notices to the debtor, it will sell the defaulted debt to a collection agency. Most credit card companies sell debts to collection agencies after 180 days.
Significance
Collection agencies use the same debt-recovery methods as credit card companies, but are typically more aggressive in their efforts. Should letters and telephone calls to the consumer fail, the collection agency has the option to file a lawsuit against the debtor for the defaulted credit card balance -- plus the collection agency's fees. Many collection agencies also report collection accounts to the credit bureaus.
Time Frame
A collection agency may only sue for a debt as long as the debt is within the statute of limitations for debt collection in the debtor's state. Each state has a different statute for debt collection lawsuits. If the company sues and wins the lawsuit, the court may award it permission to garnish the debtor's bank accounts or wages.
Considerations
When conducting collection activity, debt collectors must abide by the Fair Debt Collection Practices Act (FDCPA). Violations of the Act include threatening debtors, lying to debtors about their accounts or the creditor's intentions and discussing the delinquent debt with anyone other than the debtor or his attorney. Consumers may sue debt collectors that violate the FDCPA.
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