If a debt goes unpaid long enough, your creditor may give up on trying to collect. That doesn't mean you're off the hook: Your creditor may hire a collection agency to do the work instead or sell the debt to a collector outright. The federal Fair Debt Collection Practices Act sets rules for how collection agencies deal with you, including acceptable fees and interest.
Collection agencies have the right to charge you interest along with any collection fees mentioned in your credit card agreement and original debt agreement.
Interest and Fees
If your debt is still being charged interest, the collection agency has every right to try to collect that. The agency is also entitled to any fees or charges you agreed to in the original debt agreement. If your credit card agreement allows the company to charge you for collection costs, the agency can bill you for reasonable charges such as attorney fees and court costs. The company cannot, however, collect any added interest or fees if the original contract doesn't allow it.
Threats and Lies
Federal law – backed up by the laws of many states – says that collection agencies can't demand more money than the debt, interest and fees you legitimately owe. Even if they're only doing it as a negotiating tactic, it isn't legal. The law also bans them from giving false information about how much you owe to anyone else, including credit reporting bureaus. They can't threaten to arrest you or garnish your paycheck if they have no legal grounds to do that, and they're not allowed to threaten a lawsuit if they don't intend to file one.
Debt Amount on Your Validation Notice
Once the agency contacts you, it has five days to send you a validation notice. The notice states who you owed the original debt to, how much it is and what to do if you contest the debt. If the amount of the debt is wrong, you've already paid it or you never owed the debt, contact the agency at once. Present proof that what you say is true, and you may be able to close the case.
Negotiating Your Debt
Even if the agency can legitimately tack extra fees onto your unpaid bill, you may not have to pay. Debt collectors don't make a profit by taking you to court – they want to get as much money out of you as quickly as possible. If you agree to pay the original bill promptly, the agency may waive any accumulated fees and interest just to get the cash. Make sure you get the agreement in writing, however, then pay whatever you promised.
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