What Can Debt Collectors Do If You Don’t Pay Them? (A Lot)

“This is an attempt to collect a debt and any information obtained with be used for that purpose.” If you’ve ever read or heard this phrase, you’ve likely been contacted by a third-party debt collector.

Debt collectors are strictly regulated at both the federal and state level. They’re not allowed to just do anything they want to pressure you into paying your debts. The Fair Debt Collection Practices Act (FDCPA) contains a list of rules that debt collectors must follow whenever they attempt to collect a defaulted debt.

In fact, the statement at the beginning of this article is a disclosure that the FDCPA requires debt collectors to make the first time they contact you. It’s informally referred to as the “mini Miranda.”

While the FDCPA and several other state and federal laws do exist to protect you from unfair collection practices, there is still a long and scary list of actions that a debt collector can legally take against you if you default on a debt. If you fail to pay, a debt collector is completely within its rights to do any of the following.

A Debt Collector Can Report to the Credit Bureaus

One of the most common actions that a debt collector may take when you fail to pay is to report your collection account to the three major credit bureaus. When a collection account is added to your credit reports, the consequences can be serious. Collection accounts can remain on your credit reports for up to seven years from the date of default of the original account.

And, it’s possible a collection can lower your credit scores. When your credit is damaged by collection accounts, this can also cause quite a few troublesome side effects, such as:

Denial of loan and credit card applications
Higher interest rates if you are approved for financing
Difficulty getting hired if an employer performs a credit check
Higher insurance premiums

A Debt Collector Can Call and Write You

Collection agents are hired and trained to collect debts. Calling and writing to you are two of the primary methods they will use to try to persuade you to pay.

Believe it or not, debt collectors can even call your friends and family (to locate you only), and may call you at work unless you inform them that you’re not allowed to receive calls at your place of employment.

If you’re on the receiving end of these collection calls and letters, the experience can be downright stressful. Unfortunately, until you pay your debt, you can count on the string of collection calls and letters to continue.

The FDCPA does prohibit debt collectors from contacting you before 8 a.m. or after 9 p.m., and it even gives you the right to request (in writing) that the debt collector stop contacting you altogether. However, be aware that if you take away a debt collector’s right to contact you, then the only recourse you may be leaving them is a lawsuit.

A Debt Collector Can Sue You… and Maybe More

Some of the scariest things that a debt collector can do occur when the courts get involved. When you ignore a debt collector, they may resort to a lawsuit in an attempt to collect on your defaulted debt.

If the debt collector sues you and wins the lawsuit, or you fail to respond thus losing by default, the court will enter a judgment against you. Depending upon the state where you reside, a judgment might also open up the following possibilities:

Wage garnishment
Tax refund garnishment
Bank account levies

The moral of the story is this: If you default on a debt and a debt collector attempts to collect it, then it’s in your best interest to work with them rather than ignore them. Offer a smaller amount as a settlement, and then pay it and move on with your life.

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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit-related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

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