There are 7,060 collections agencies in the U.S.—here’s what to do you if your credit card debt is sent to one

Select ’ s column team works independently to review fiscal products and write articles we think our readers will find utilitarian. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners. Collections agencies buy your unpaid credit calling card debt from your batting order issuer when your balance lingers excessively long — but that does n’t mean it goes away. When a collections representative from your credit rating menu issuer calls you, it ‘s normally because you have n’t made at least the minimum requital for at least 30 days. But if you ‘ve let it go unpaid for months, your issuer could pass it on to one of over 7,000 third-party collections agencies in the U.S.

There are a few things you can do to stop this process before it even starts. For case, a number of card issuers — including Amex, Bank of America, Chase and more — have stepped ahead to offer fiscal aid programs in unaccented of the coronavirus pandemic. But in casing you are among the 1 in 3 Americans with delinquent debt, it ‘s worth knowing how debt solicitation works, understanding your rights and how to get assistant when you need it. Select spoke with Shelly-Ann Eweka ( CFP, ChFC ), a wealth management director at TIAA, who shares everything you need to know about debt collections .

What is a collections agency?

“ A collection agency is a party that is hired by lenders, creditors, medical providers and federal and local governments to get you to pay or make arrangements to pay what you owe them, ” Eweka tells Select. The most common types of debt that go to collections are credit card balances and aesculapian bills, but there are many early reasons why people go into debt. Rent, scholar loans and tax debts are other examples of what can get passed on to a collections agency. According to Debt.org, there are three phases to debt solicitation :

  1. You are past-due, or delinquent, on your bills and your card issuer’s collections representative calls you to pay your overdue balance. After about six months (depending on the lender), they will give up.
  2. Next, your creditor passes it to a third-party agency that’s separate from your card issuer, but contracted through them. If the agency gets you to pay your debt back (plus interest and late fees), it gets a commission.
  3. If the agency is unsuccessful, your creditor sells your debt to a collections agency (sometimes known as a debt buyer) for pennies on the dollar. At this point, your creditor is cutting its losses and is no longer involved. The collections agency tries to get you to pay back as much of the original debt as possible so it can make a profit.

There’s ‘no set rule’ on how long it takes for your debt to go to collections

Six months is the general guidepost, but according to Eweka there is “ no set govern ” on how many times you ‘ll get a telephone cry or letter before your debt is turned over to an agency. “ sometimes, companies use collection agencies to service their debt collection process from the begin, and other times it can take a longer total of time, ” says Eweka. Check your recognition report at least once a class to reduce any storm calls from collections, Eweka says. “ sometimes people do not flush realize they have some of their debts. ”

The three major credit chest of drawers ( Experian, Equifax and TransUnion ) are offering absolve hebdomadally credit reports for the following year. They are available on AnnualCreditReport.com through April 2021 .

How to avoid having your debt sent to collections

If you ‘ve recently lost your job or incurred an unexpected expense such as a checkup charge, there are resources to help you juggle debt refund. “ The best thing to do to avoid having your debt going to collections is contact the creditor to set up a payment plan or ask for decrease on the total of debt owed, ” says Eweka. Do this angstrom soon as you know you ‘re going to have disturb paying your bills, and you could benefit from a lower APR, irregular forbearance or postponement, waived deep fees or other accommodations depending on your fiscal situation. Be certain to tell your creditor about any fiscal hardships you ‘re experiencing, such as a holocene layoff, furlough or reduction in working hours. “ Remember that the sum of debt forgive may be taxable when you file your tax return, ” advises Eweka. And before you enroll in any type of fiscal aid, consider what ‘s best for your site. Don’t miss:  Here’s the ‘most basic rule of thumb’ when it comes to paying off your debt, according to an expert

Do this if your debt is already in collections

To start digging out of debt that ‘s already in collections, “ get some help cursorily, ” says Eweka. Contact the National Foundation for Credit Counseling ( NFCC ) and ask to work with a nonprofit organization credit advocate. With the advocate ‘s avail, call the collections agency and arrange a payment plan so the delinquent marks roll off your credit report a promptly as possible. It can take up to seven years for your past-due history to disappear completely off your report, but as you work toward settling outstanding debts your score will consistently increase with time. even if your debt is already in collections, debt collectors are not allowed to lie to you, threaten you, use lewd language or harass you by phone. however, a new report from Pew Charitable Trust found that increasingly, collections companies are taking debt settlements to civil court. The report shows that, from 1993 to 2013, the total of debt collection lawsuits steadily doubled — from at least 1.7 million cases to 4 million cases countrywide. And although laws change state by submit, collections agencies are broadly not allowed to use unfair practices like adding fees and interest on top of what you owe ( since they ‘re already making a profit from it ), nor can they threaten to take your property through illegal means. however, they may be able to leverage the legal system in surprise ways, like suing you or freezing your assets. A big majority of debt lawsuits ( over 90 % ) are against individuals who do n’t have legal representation. Yet “ consumers with legal representation in a debt claim are more likely to win their case outright or reach a mutually agreed colonization with the plaintiff, ” cites Pew ‘s report. If you find yourself in this site, know you can seek free legal advice and/or pro bono advocate by looking up nonprofit legal help organizations in your express.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select column staff ’ mho entirely, and have not been reviewed, approved or otherwise endorsed by any third party .

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