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Is Your Credit Card Debt About to Go to Collections? This is What You Need to Know

Laws surrounding collections can vary by state, so you should contact your state attorney general’s office to learn more about your rights on a state level.  

April 12, 2021

If you’re struggling to pay down your credit card debt, know that you are not alone. In the U.S. there is more than $756 billion in outstanding credit card debt and three quarters of credit card carriers are holding a balance on their credit cards. What’s the average balance of that debt? A whopping $5,315. 

We’re throwing those less-than-fun numbers at you not to scare you, but in the hopes that you’ll leave any debt-related shame at the door, so you can focus on what may be coming next. If your credit card debt has become too much to manage and you can’t keep up with minimum payments, your debt may be at risk of being sent to collections with a debt collection agency. If that’s the case, then it’s important that you understand what your options are moving forward and — even more importantly — what your rights are. 

What Is Debt Collection?

A debt collector can be a person or a company that collects past-due debts. If you aren’t able to make your minimum credit card payments, eventually the credit card issuer may sell your debt to a collection agency, who then tries to collect the money owed. 

Know Your Rights

You’ve probably heard horror stories about debt collectors calling every hour of the day or showing up at your job unannounced. The stories alone are enough to keep you up at night. Luckily, the days of debt collectors being allowed to harass you are long gone, thanks to the Fair Debt Collection Practices Act (FDCPA). This act prohibits debt collectors from using practices that are considered abusive, unfair or deceptive to collect debt. The following list outlines what debt collectors can’t do, and it’s important you’re aware of your rights so that you can recognize any abusive or illegal behavior.

Debt collectors are not allowed to:

  • Contact you at inconvenient times without your permission.
  • Attempt to communicate with you at work after you’ve told them your employer does not approve of it.
  • Contact you after you’ve sent them a letter requesting they stop contacting you (except if they need to inform you of any plans to take a specific action).
  • Have communications with your family, friends or employer to determine where you work or live.
  • Harass you with repeated phone calls, profanity or threats. 
  • Falsely claim that you will be arrested.
  • Threaten you financially by claiming they can deduct money from your paycheck or sue you (except if they intend to do so legally).

If you believe a debt collection agency or debt collector has acted inappropriately, you can report them to the State Attorney General’s Office, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). Laws surrounding collections can vary by state, so you should contact your state attorney general’s office to learn more about your rights on a state level.  

When a Debt Collector Contacts You

The debt collection agency will make the first move. Within five days after they first contact you, they must send you a written notice regarding your debt. This notice needs to include the name of the creditor, the amount you owe and what to do if you believe there has been a mistake and you don’t owe the money. 

If you do owe all or part of the debt, you can arrange payment with the creditor. If you believe a mistake has been made, you need to contact the creditor in writing and inform them of the mistake. You’ll also want to send a copy of your communication to the collection agency and inform them not to contact you.

Can a Debt Collector Force Me to Pay?

A debt collector can’t force you to pay them, but a judge may be able to. While it can be tempting to avoid a debt collector if you can’t pay off your debt in full, this isn’t necessarily the best course of action. If the debt continues to go unpaid, the collector may choose to sue you in an attempt to collect the funds owed. For a debt collector to build a solid case against you in court, they’ll need to show the judge that the debt is valid and is owed by you. It’s up to a judge to determine if you owe the debt. Ignoring a lawsuit from a debt collector isn’t a good idea, as judges are more likely to rule against you if you don’t respond to the suit. If they rule against you, you risk potentially having your wages garnished, having money in your bank account frozen or garnished, or having a lien put on your property. 

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Settling Credit Card Debt with a Collection Agency 

To avoid a lawsuit, you may want to figure out how to settle credit card debt with a collection agency. You may be able to work with the collector, asking them to accept less than what you owe to settle the debt once and for all. If you do come to an agreement about debt settlement with the collector, make sure you get the agreement in writing via a letter or signed form from the collector that acknowledges how much you’re paying and that you’re released from any future obligations. Hold onto any records of your payments in case you need proof of those payments at a later date.

Taking Charge of Your Finances

Waiting until you can’t make minimum payments on credit card debt is not the ideal time to deal with your debt. To keep the upper hand with creditors and pay your debts on your terms, consolidating your debts is one option you might consider. Tally can help organize and schedule your payments in the way that works best for your financial situation. Do away with late fees and maybe even have the funds to pay a little extra and become debt-free faster.