Your Debt Collection Rights

The Big Picture of Debt Collection

When you receive a debt collection letter or call, it’s likely from a company that’s completely unfamiliar to you. To understand how that’s possible, it’s necessary to understand the lifecycle of a debt. Let’s say that you owe money on a credit card. If the debt becomes delinquent, you’ll likely receive payment demands from the company. You might even get a call from an employee of the company. Calls and letters from the creditor to whom you owe money are considered first-party debt collection.

After 6 or 12 months, the credit card company engages the services of an unrelated company – a third-party debt collector. The third-party debt collection agency collects on behalf of the credit card company, and typically keeps a percentage of the amount they collect. If time passes and the third-party debt collection agency is unsuccessful, the credit card company likely bundles your debt with other old debts, writes the debt off, and sells the debt for pennies on the dollar to debt buyers. The debt buyer then tries to collect the debt, restarting the cycle of collection letters and calls.