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Debt Collectors: A Complete Guide

Catherine Hiles • September 18, 2023

Even those with the best intentions can find themselves in debt and worry that they can’t pay it off. It may start with a couple of missed payments, but before you know it, you could become delinquent on your loans, which can end up in collections. Soon enough, you’re getting calls from debt collectors and worry that your credit won’t recover.

But while this is a difficult situation, you can take control of it and fix it with the right actions. In this guide, you will learn the role of a debt collector, how to find out to whom you owe money, the best ways to pay off debt in collections, and what can happen if you default on your debt.

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What is a debt collector, and why do they call?

If you fall behind on one or more payments for an installment loan, credit card, or bills, the lender can send the balance to collections. But what does that mean, exactly?

  • A debt sent to collections means your debt has been turned over to a debt collector, who then takes measures to try and recover the balance A debt collector usually works for a debt collection agency, though some larger lenders may have their own debt collectors on staff.
  • A debt collector will contact you via phone (personal or work) or in person to recover your unpaid debt. If they cannot reach you through these methods, they may contact your family or friends to ensure they have accurate contact information.
  • If you agree to repay the debt, the lender will pay the debt collector a fee — usually a flat rate or a percentage of the debt. Sometimes, a debt collection agency may purchase the debt from the lender for a reduced fee and then attempt to collect it to benefit themselves.

It’s best to pick up the phone if a debt collector contacts you. You may be able to reach a repayment agreement that suits both you and the lender, which can help you in the long run.

How to find out which debt collection agency you owe money to

Want to get out of debt collection? You’ll need to pay the credit collection services agency to do so.

But how do you know who to pay and who the debt collection agency is? In some cases, it might be obvious. If not, here are ways to determine which debt collection agency you owe money to.

Check your credit report

You’ll want to get your credit report if you’re in debt collection but are unsure which loans are not in good standing. Your credit report is a document that contains your entire credit history, including outstanding loans that may be in debt collection.

Many debt collection agencies report to the three major credit bureaus — Experian, TransUnion, and Equifax. Check all three, as some debt collection agencies only report to one credit bureau but not all of them.

Answer the phone when bill collectors call you

Sometimes, your debt collection fees won’t appear on your credit report. And sometimes, the debt can be passed onto other debt collection agencies, leaving you unsure who to contact.

In this case, you will likely have to wait until the debt collector calls you to get more information. It’s not fun; no one wants to deal with debt collectors on the phone.

But if you’re unsure who the debt collection agency is, answer the phone, get the information, and ask how to get your loan in good standing. You’ll also want to request a debt verification letter and check your records to ensure you’re not overpaying, as debt collectors can also make mistakes.

Three ways to pay off debt collectors

If you want to get out of collections and repay your debt, there are several ways to do this. Some may require negotiation; whatever you do, get everything in writing and keep your records somewhere secure. Here are three ways to pay off debt collectors.

1. Negotiate a settlement with your debt collector

In some cases, you may be able to negotiate a settlement with your debt collector. A settlement is typically less than the amount owed and may be used in exchange for deleting the account from your credit report (though that’s up to the discretion of the collector; there’s no guarantee they will agree to tell the credit bureaus to remove the account from your credit report).

You’ll need a written letter about the settlement terms before making your first payment. Make sure you understand your rights and responsibilities and that you know the terms of the settlement.

2. Pay off the debt in full

If you have a small bill that is outstanding and in collections, you can pay off the debt in full, though there’s no option to negotiate with the collector to remove the account from your credit report. However, this option requires less work on your part as there’s no negotiation required.

Once you’ve paid off the debt, consolidating your other debts can help you manage your other loans to prevent delinquency. Two popular methods to look into are the debt avalanche and debt snowball methods.

3. Create a debt repayment plan

If you can’t negotiate a settlement or pay the debt entirely, you can talk to the debt collection agency about a repayment plan.

In this case, making all your payments on time and in full is essential to get your loan in good standing. It’s possible to pay off debt on a small income, though it can take time and dedication.

Set up direct deposit with Chime to get paid up to two days early.*

What happens if you don't pay a debt collector?

If you have debt collectors calling you, you might be tempted to ignore them and hope they give up. Unfortunately, if you aren’t paying off collections, your problems will only get worse. Here’s why.

Your credit score will take a hit

The debt collection agencies report to the major credit bureaus. So, if you ignore them, your credit score may go down. This can make it more challenging to get approved for loans and may result in higher interest rates if you do get approved.

Sometimes, you can negotiate to remove collections from your credit report. If not, the entry will remain on your credit report for seven years.1 And remember: This can impact every area of your financial life.

You can also look into how to get a loan with bad credit. A common method is to use a cosigner with good credit, though you may choose to work on boosting your credit score before applying for any additional loans.

You may have late fees, making the debt harder to pay off

If your debt is in collections, it’s not just the outstanding balance you have to worry about. There could be additional late fees added to your balance. Any extra fees will add to the total cost of your loan, making it harder to pay back.

Debt collector regulations and consumer protection

While debt collectors can take specific actions like calling you at work, there are restrictions in place to prevent debt collection from becoming an abusive practice. The Fair Debt Collection Practices Act, which is managed by the Federal Trade Commission (FTC) and has been in effect since 1978, protects debtors from being harassed by debt collectors.

According to the FTC, debt collectors must comply with the following rules.2

  • Debt collectors cannot contact you before 8 a.m. or after 9 p.m.
  • They cannot make false claims, like suggesting you will be arrested for nonpayment.
  • They cannot make threats against or physically harm you.
  • They cannot seize your assets unless they have court approval.
  • If you send a letter to the debt collector asking them to stop contacting you, the debt collector must comply.

The Consumer Financial Protection Bureau (CFPB) also has the following rules for debt collectors.3

  • The debt collector must include your contact details, the creditor’s name, any applicable account numbers, and the amount of debt in their first written or electronic contact with you.
  • They must provide information about your rights and the steps to take if you want to file a dispute.

Deal with your debt

Debt collectors have one job — to collect your debt. To do that, they will call you many times until they reach you. This can be stressful.

So, answer the phone and face the issue head-on. Talk to your debt collector about your options — typically a settlement, a payment plan, or paying the debt in full. Make sure you get validation of the plan in writing.

It can be challenging, but getting out of collections will help you breathe easier and relieve stress. Once you do this, you can focus on other financial goals, like investing for your future.

Learn about the benefits of high-yield savings accounts and how they can help you grow your money faster.


Do debt collectors report my information to credit bureaus?

Yes, debt collectors will usually report your information to the major credit reporting bureaus. However, before doing so, they must contact you and allow you to repay the debt. This information will likely remain on your credit report for seven years.

Are debt collectors licensed?

Some states require debt collectors to be licensed, while others do not. However, regardless of state laws, all debt collectors must comply with federal regulations set forth by the Federal Trade Commission (FTC).

Does the Fair Debt Collection Practices Act cover business debts?

The Fair Debt Collection Practices Act applies only to consumer debt, which means business debt is not covered.

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1 Information from TransUnion's How Long Do Collections Stay on Your Credit Report? As of September 15, 2023:

2 Information from FTC's Debt Collection FAQs as of September 17, 2023:

3 Information from CFPB's How the CFPB's Debt Collection Rule Impacts You as of September 15, 2023:

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