Credit Card Debt Collection

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Credit Card Debt Collection

The rising number of people defaulting on their credit card payments has also given rise to the number of credit card debt collection agencies. As a result many credit card companies have to result to a charge-off, which means the creditor decides it cannot gain anything by pursuing the debt any more on its own. At this time, it can either write it off as a bad debt or hand it over to a collection agency. Most of the time, the credit card company sells the account to the agency for a portion of the outstanding balance, just to recover some of the loss.

Even though these credit card accounts stay on your credit report for seven years, they many be sold to a credit card debt collection agency after that time. For people contacted by a collection agency after the seven years is up, starting to make repayments can actually be a detriment because the credit card bill will show up again on the credit report.

How Does Credit Card Debt Collection Work?

Credit card companies try to recover the overdue accounts either on their own through their credit departments of by outsourcing the account to a credit card debt collection agency. When a collection agency takes over the account, it receives a percentage of the amount it collects as its fee. Therefore it will pursue aggressive means to collect the money.

Although as a debtor, you do have a legal responsibility to pay their debts, when you owe money on a credit card, the creditor does not have any collateral that it can foreclose on when you default on your payments. A credit card debt collection agency can try many different methods to collect the money, but it still has to operate within the guidelines of the Fair Debt Collection Act. This means that an agent that contacts you cannot force you to sign any papers or commit to paying any money. It is not permitted to call you repeatedly to the point of harassment. Another limitation placed on collection agencies under this law is that they cannot mislead you or take advantage of a vulnerable situation.

You might also not have to repay the money if a reasonable length of time has elapsed since the last payment. For example, if you owed money on your credit card and didn't pay if for seven years and the company has not taken legal action against you, you will probably not have to repay the money.

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