Why is a Collection Agency Calling Me?

Q: John, I started getting phone calls last week from a company called “name withheld.”  They told me that they’re a collection company and that they are collecting a debt that I owed years ago to a credit card company. Is this legal and why should I pay them?  Can’t I just go to the credit card company and pay them directly?  Will this hurt my credit?

A: There are a lot of good questions packed into your note, so let’s take them one at a time. The reason you’re getting calls, and will eventually get letters, from a collection agency is because they are trying to collect money from you for a defaulted credit card debt. The collection agency has either been hired by the credit card issuer to collect the debt or they have outright purchased the debt and THEY are now the creditor, which means you now own them money.

The fact that they identified themselves as a debt collector is a requirement under the Fair Debt Collection Practices Act (FDCPA). They can’t contact you and pretend to be someone else.  And, they cannot disclose your debt to a 3rd party. Those are all violations of the FDCPA.

Yes, it is perfectly legal for a collection agency to either attempt to collect a credit card issuer’s debt or to buy the debt and assume the role as the creditor. And yes, it is perfectly legal for them to collect debts that are even years old. They can also report the collection to the credit reporting agencies BUT the collection cannot, under any circumstance, be on your credit reports for more than 7 years from the date the original account went into default.  That means if the credit card debt defaulted in June 2007 any collections associated with it cannot remain on a credit report after June 2014. Even if you pay the collection, settle the collection or make periodic payments to pay off the collection, still June 2014.  Nothing resets the date from which the collection purges.  And yes, collections can certainly hurt your credit scores.  The amount of the score impact is going to vary on a variety of other things.

You can go back to the original creditor and attempt to pay the debt, or settle it. But, you can only pay them if they did NOT sell the debt to the collector. If they’ve sold it then you don’t owe the creditor anything any longer. If they’ve simply consigned the debt to the collector then you could repay the original creditor directly.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.


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