Consumer Information

This information is not intended to be a complete or official summary of collection laws, but simply an attempt to provide an understanding of the provisions of these laws as they pertain to a consumer when contacted by a third-party debt collector, and the most frequently asked questions following such contact. Most of the information presented here applies only to working with third-party debt collection agencies. The association is not able to assist in handling problems or disputes between a consumer and the original creditor.

Avoid Problems by Managing Finances

Careful planning and active communication are important tools in effectively managing personal finances, particularly if you are struggling to make payments on your current debt obligations or are being contacted by a debt collector.

  • Plan and Budget: Before spending money, determine what you can reasonably afford, create a budget and plan for gifts, and stick to it. Keep in mind that purchases on credit will need to be repaid at some point in the future.
  • Track your Spending: Keep tabs on how much you spend to help stay within the guidelines of your budget.
  • Protect your Identity: Be careful about giving personal information including a credit or debit card number over the phone and online. Monitor your accounts and immediately report any suspicious or unauthorized purchases to your bank or credit card company. You should monitor your credit on a regular basis, and are entitled to a free credit report each year at If you believe your identity has been stolen, contact your local police department.

Communicate with Creditors

Having trouble making payments on an existing debt? Contact the creditor to discuss alternative payment arrangements. It won’t eliminate your debt, but it can make things more manageable. Communication is particularly important if you are behind in payments to a creditor (e.g., credit card, loan, mortgage, medical) as it may help avoid the debt appearing on credit reports.

Communicate with the Debt Collector

In the event you hear from a debt collector, avoiding a letter or call won’t make the debt go away. The reason for the contact cannot be resolved without the ability to communicate; whether it’s to pay an owed debt, verify an alleged debt or confirm that the debt collector has reached the wrong person.

Know your Rights

Consumers have important rights when contacted by a creditor or debt collector. For more information about consumer rights in debt collection or to ask questions, visit Created by the ACA International Education Foundation, It’s a free resource that does not require log-in or the sharing of personal information.

Frequently Asked Questions

The creditor generally is not required to let you know it’s referring your account to a collection agency. There are rare exceptions to this rule.

Either in its first contact with you regarding an unpaid bill or in writing within five days after that contact, the collection agency must provide the following information to you: (a) the amount you owe, (b) the name of the creditor, and (c) the process to follow if you dispute the bill. The five-day notification period applies whether the collection agency’s first contact with you is by telephone or in writing, but many agencies include this information on their initial written notice, whether or not they have telephoned first.

It is important that you respond as soon as possible. If you don’t, the agency may keep trying to reach you to collect what they believe is a valid debt. lf you legally owe the bill, you should arrange to pay it if possible.

Once the debt has been assigned to the collection agency, it is the collection agency that is entitled to receive all payments. The collection agency becomes the “owner” of the debt you owe. The collection agency is responsible for collecting the debt and is the only one who can agree to payment terms.

An agency may only call at hours presumed to be convenient for the debtor—generally, between 8 a.m. and 9 p.m. If these hours are inconvenient for you, you may ask the agency to contact you at other times. There is no law that specifically limits the number of calls an agency may make to you, but repeated calls over a short period, which may be annoying or harassing, are prohibited.

Although a collector may call others to try to locate you, he or she may not discuss your account or debt status except for your spouse, attorney or person necessary to enforce a judgment. He or she must give his or her name, but not the name of the agency unless they are specifically asked for it.

An agency may contact an employer, but only for the following reasons:
⦁ To communicate with you at your place of employment.
⦁ To verify your location.
⦁ To garnish your wages once you have been taken to court and a judgment was entered against you.
⦁ To find out whether you have medical insurance to cover a medical bill.

Yes, unless the debt collector knows, or has reason to know, that your employer prohibits you from receiving such communication. However, if you do not want to be contacted at work, you can request that they not telephone or send you notices at work. Be sure to make your request in writing to protect yourself. If the agency does send you a notice at work, it must be marked PERSONAL & CONFIDENTIAL. If you request no further contact at work and the agency is unable to contact you at home, the agency may have no other option but to file a civil lawsuit for the bill it is collecting.

If you want to stop all contact from the agency you may request that they not contact you again—IN WRITING. Your letter should be sent by certified mail, “return receipt requested,” so you have proof of its delivery. Once the agency receives your letter, its employees can only contact you one final time to explain what action they plan to take. After that, contact must stop. Remember, though, that if you request no further contact in any way, except for certain messages allowed by law, you may leave the agency with no choice but to file a civil lawsuit against you.

No. A collection agency has the choice of demanding the whole amount or taking payments on the bill. It will want to know your actual ability to pay the debt. The agency can set what it is willing to take for the payments and how often you will be required to make them.

No. The agency’s responsibility is to collect the debts assigned to it. The agency will want to have payments made pursuant to an agreed plan, so it knows when to expect payment, and when the debt will be paid in full.

You don’t have to sign any contract with a collection agency. However, if the collection agency wants the payment agreement to be in writing, they have the right to require you to sign a contract as a condition of accepting payments. This can be a protection for both of you if you make the payments under the contract.
If you make your payments on time and pay the agreed amount, the agency cannot change the way they are collecting the bill or demand more money. But, if you fail to make the payments according to the contract, the collection agency could then demand payment of or sue you for the entire remaining balance, not just the defaulted payment.
The contract may also be in the form of a promissory note. These are both legal documents by which you will be bound—do not promise more than you can pay, and do not sign one just to appease an agency. A contract is a legally enforceable agreement.

The same conditions apply to unwritten agreements as do the written agreements. Both are contracts between you and the collection agency.

No, you are not required to give postdated checks or pre-authorized payments to a collection agency. However, many consumers and collection agencies have found that this is very efficient means of structuring a repayment plan as it requires little ongoing maintenance by either party. Writing or accepting postdated checks or pre-authorized payments are not illegal so long as you plan to cover them when they are cashed or presented. The agency is required to send a notice of intent to deposit letter prior to deposit of any check.

When assigned the debt by the original creditor, the collection agency can demand and collect interest from the debtor to the same extent that the consumer would be obligated to pay interest to the original creditor. The obligation to pay interest is not changed by the debt being assigned to a collection agency.

If a collection agency does demand and collect interest, it should be shown as a separate amount from the principle when it is first demanded from the consumer. Subsequently, each additional amount of interest should be shown as a separate increase to the total balance due at that time.
The obligation to pay interest exists whether a contract you signed included a promise to pay interest, the contract you signed was silent with respect to the amount of interest which would become due, or there was no written contract for the monies, goods, or services you obtained from the creditor. California law provides for these three situations, if there is not a specified legal rate of interest, then it shall be 10 percent per annum for debts incurred after January 1, 1986. A creditor or collection agency may demand and collect a higher rate of interest if a written contract on which the debt is based includes a provision for higher interest (i.e., credit card company contract you signed provides for an 18 percent interest rate, then the collection agency may demand and collect the 18 percent interest), so long as that higher rate of interest could properly have been part of the contract with the original creditor.

If possible, contact the agency before you miss a payment or send a partial payment. Explain the problem and what you plan to do to solve it and catch up on your payments. Many agencies will work with you, especially if you’ve already made several payments on time.

If you do not owe the bill, or if the bill has already been paid, send the agency a written explanation along with copies of receipts, cancelled checks and any other information to back up your claim. It is important to send your letter within 30 days after your first contact from the collection agency. Once the agency receives your dispute letter, it must stop further attempts to collect the debt until it sends you written verification to show that you do owe the bill and that the amount of the bill is correct. If you are questioning only a part of the bill, the agency may not continue to collect on that part until it has provided verification, but you must make arrangements to pay the rest of the bill.

If you are not the person the agency is looking for, write and explain the mistake. You may be asked to provide a driver’s license or social security number to prove that you are the wrong person. If you are unsure about your legal responsibility for a debt, check with an attorney.

If the collection agency is unable to obtain verification that you owe the debt, it may return your account to the creditor and stop collection efforts.

Yes. The agency, represented by its counsel, may file a civil lawsuit against you in Superior Court. A collection agency may not sue in small claims court. If a judgment is obtained by the agency you may be liable for additional expenses for court costs and/or attorney fees.

Yes. Most collection agencies, though not required by law, provide a brief period after receiving your account before reporting it to the credit bureaus. Therefore, it is important that you make immediate contact with the agency to resolve the matter before any negative information is reported about your past due account.

If you owe the debt you should pay it. Payment of the debt will allow the agency to report your account as paid in full to the credit reporting agencies. If you dispute the debt you should send written notification to the agency together with supporting documentation to substantiate your position.

No. They are required to show it as “paid collection.” The credit reporting agencies prohibit deleting a reported debt merely because it was paid.

There are certain steps you must take if you have been the victim of identity theft.

If you are a victim of identity (ID) theft, report it immediately. The Federal Trade Commission and your local police department are critical in filing the complaint. Once you file the ID theft with the FTC, you will have an ID theft affidavit. Print and take this with you to file the crime with the local police and get a police report. These two documents together are your identity theft report. Your identity theft report will be very important as you resolve the problem with creditors, banks, and any other companies where fraudulent accounts were set up in your name. You may also report specific types of identity theft to other agencies.

Long-term Care Identity Theft – Report a claim to the long-term care ombudsman in your state, if the theft was a result of a stay in a nursing home or long-term care facility.

Medical Identity Theft – Contact your health insurance company’s fraud department or Medicare’s fraud office.

Tax Identity Theft – Report this type of ID theft to the Internal Revenue Service and your state’s Department of Taxation or Revenue.
In addition to federal government agencies, you should also report the theft to other organizations, such as:

Credit Reporting Agencies – Contact the three major credit reporting agencies to place fraud alerts or freezes on your accounts so that no one can apply for credit with your name or social security number. Also get copies of your credit reports, to be sure that no one has already tried to get unauthorized credit accounts with your personal information.

Financial Institutions – Contact the fraud department at your bank, credit card issuers and any other places where you have accounts. You may need your ID theft reports from the police and Federal Trade Commission in order to report the fraud.

Retailers and Other Companies – You will also need to report the fraud to companies where the identity thief created accounts, opened credit accounts, or even applied for jobs in order to clear your name.
State Consumer Protection Offices or Attorney General – Your state may offer resources to help you contact creditors, dispute errors and other helpful resources.

As an additional resource, you may visit AskDoctorDebt. AskDoctorDebt is the place to find answers to your credit and debt questions

LEGAL DISCLAIMER: Nothing on this site is to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.