For a lot of people, financial challenges can appear unannounced and make it difficult for them to manage their money. Your credit card bill goes overdue, or you lag behind in paying your utility bills. When you see no way out, you start avoiding the calls of creditors who follow up to get their dues cleared.
However, this situation doesn’t last long. Most creditors give up after a few months. Instead of keeping a bad debt in their books, they prefer selling it to a collection agency. If this happens in your case, it can spell more trouble for you.
Firstly, being pursued by a collection agency can impact your credit score. Needless to say, this dents your prospects of getting fresh credit to resolve your financial problems. Secondly, collection agencies have a way of working through legalities that makes it much harder for you to rescue yourself. If you are unaware of your rights, you can end up in trouble.
Here is everything you should know about what happens when creditors sell your debt to a collection agency, and what you should do next.
How Do Lenders Sell Debt to Collection Agencies?
Most creditors follow a timeline before they sell the debt of delinquent borrowers—usually, they keep a bad debt on their books for three to six months. During this period, they will try to persuade you to clear your outstanding dues. After this time lapses, they can choose to sell the debt to a third-party collection agency. The lender does not require your permission to execute this transaction.
After this happens, the new account owner of the collection agency will inform you of the transaction. The law mandates that such an agency sends you a written notice within five days of the collector’s first attempt to contact you. This is called a debt validation letter.
If you receive this letter, make sure that it contains these details:
- The total amount of the debt.
- The original lender.
- A statement of your right to dispute this debt.
What Can You Do When a Debt Collection Agency Calls You?
If you have received a written notice from a collection agency stating that they are the new owners of your debt, the first thing to know is that you do not have to do it alone. The process can often get lengthy or too complicated for you to handle on your own, so consider contacting a professional for help. Briteside Solutions is always here to help with any questions you may have.
At the same time, you may also want to know that this process of selling your debt can happen between agencies too. If the first agent is unable to collect the debt from you, they can sell it to another one and so on. This can cost you heavily in the form of an unfavorable credit score.
If your finances do not allow you to clear your debt, always make it a point to know your rights. For instance, the collection agency does not have a right to seize your possessions. They can take extreme action only if your original contract and the state law allow it.
Knowing Your Rights
Proper financial education can help you protect yourself from repeated calls and not yield to any unreasonable demands from debt collection agencies. At Briteside Solutions, we provide Consumer Rights Education to inform our clients about debt collectors and the steps they can take to protect their interests.
Visit our website to find out more!