Information on Collection Agencies and Statutes of Limitations
A collection agent is either a creditor or is a representative of the original creditor. Both collection agents and creditors are bound by federal and state laws concerning the collection of debt. Specifically, the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act(FCRA) are key laws regarding these issues.
For more information about statutes of limitations, see the following Bills.com resources:
- Collections Agencies, Collections Laws and Your State’s Statute of Limitations to understand the collections process
- Statute of Limitations Laws by State to see your state’s statutes of limitations
- How to Tell Which Statute of Limitations Applies to Your Situation
Assignment of Debt
Most consumer debt contracts give the original and subsequent creditors the right to assign the debt. A collection agent buying a debt will do so for 5 to 50 cents on the dollar. The collection agent has the right to collect the entire balance due plus interest (state laws set the rules in this area), but does not necessarily expect to collect the full amount.
A third party purchasing a collection account must abide by previous contracts between the parties. If a debtor creates a settlement agreement with a creditor, all subsequent assignees of the collection account take the account subject to its terms.
Therefore, if a debtor has a legal contract with a previous debt collection agency, then any current party attempting to collect the debt is bound by the terms and conditions of the contract. Assuming that a contract stipulated no interest to accumulate or other fees, then the current agent may ask for immediate payment in full plus additional fees, but the debtor has no obligation to agree to the new terms.
Collection agents can buy a fully documented account, which includes all of the invoices and records of the original creditor’s collection efforts. Or, the collection agent can buy a bare account with little documentation. A fully documented account is worth a lot more than a bare account. More on bare and fully documented collection accounts in a moment.