Is It Illegal for a Collection Agency to Buy Your Debt and Come After You?

No, it is not illegal. Debt buying is a common and legal practice in the United States . Creditors frequently sell unpaid debts to debt buyers, often for pennies on the dollar, to recover a portion of what they’re owed .

What is a debt buyer?

A debt buyer is a company that purchases delinquent or “charged-off” debts from original creditors or other debt owners . Once purchased, the debt buyer legally owns the debt and can attempt to collect it themselves or hire a collection agency to collect it on their behalf .

What is the difference between a debt buyer and a debt collector?

The main difference is who owns the debt .

Are debt buyers considered debt collectors under the law?

Yes. Under the Fair Debt Collection Practices Act (FDCPA), debt buyers are generally considered debt collectors . This means they must follow the same federal rules that apply to traditional collection agencies .

What laws apply to debt buyers?

Debt buyers must comply with:

• The Fair Debt Collection Practices Act (FDCPA): Federal law prohibiting abusive, unfair, or deceptive practices

• The Fair Credit Reporting Act (FCRA): Federal law governing how debts are reported to credit bureaus

• State debt collection laws: Many states have additional regulations specifically for debt buyers

Do debt buyers have to prove they own the debt?

Yes. If you request proof, a debt buyer must be able to demonstrate they legally own your debt. Under the FDCPA, you have the right to request debt validation within 30 days of first contact .

Some states impose additional requirements. For example:

• California law requires debt buyers to possess specific information before attempting collection, including proof they own the debt, the charge-off balance, and the date of default

• Debt buyers must also provide this documentation within 15 days of a written request

What documentation must a debt buyer have?

In many states, debt buyers must possess:

• Proof they are the sole owner of the debt or have authority to collect it

• The debt balance at charge-off and explanation of any post-charge-off fees

• The date of default or last payment

• The name and address of the original creditor

• A copy of a contract or document evidencing the debt

Can a debt buyer sue me?

Yes. Because they legally own the debt, debt buyers can file lawsuits to collect what you owe . However, they must follow the statute of limitations in your state .

What is the statute of limitations for debt buyers?

The statute of limitations is the time period during which a debt buyer can sue you . Most statutes of limitations fall in the three to six year range, depending on your state and type of debt .

Important: The clock typically starts on either:

• The date of your last payment, or

• The date you first missed a payment

Can debt buyers collect on time-barred debts?

Yes, but with restrictions. Technically, your debt never goes away—you still owe it . However, once the statute of limitations expires:

• The debt buyer cannot sue you to collect it

• If they do sue, you can ask the judge to dismiss the case

Some states require special notices for time-barred debts. Texas law, for example, mandates that debt buyers include specific bold-face notices in their initial communication stating they will not sue on time-barred debts .

What happens if I make a payment on an old debt?

Making a payment can restart the clock. This is called “reviving” the debt . Debt buyers know this and may try to get you to make even a partial payment or a verbal promise to pay .

Exception: In Texas, if an action to collect is barred by the statute of limitations, payment or reaffirmation does not revive the cause of action .

Can debt buyers report debts to credit bureaus?

Yes, with limitations. Debt buyers can report debts to credit bureaus, but:

• The information must be accurate

• They cannot report unless they’ve spoken to you or sent a notice about the debt

• Debts generally cannot be reported for more than 7 years from the date of first missed payment

What are the things debt buyers can never do?

Under the FDCPA, debt buyers (like all debt collectors) cannot :

• Contact you before 8 a.m. or after 9 p.m. without your consent

• Contact you at work if you tell them you’re not allowed to receive calls

• Call more than seven times in a seven-day period

• Threaten you physically or use obscene language

• Pretend to be an attorney or government official

• Lie to you about the debt

• Threaten to sue you unless they actually plan to take legal action

• Try to collect more than what’s owed

Can debt buyers contact me on social media?

Debt buyers may contact you privately on social media, but they cannot publicly post about your debt . They must also offer a reasonable method for you to opt out of electronic communications .

What should I do if a debt buyer contacts me?

Step 1: Do not panic

Debt buying is common, and you have rights .

Step 2: Wait for the validation notice

Within five days of first contact, the debt buyer must send you a written validation notice containing :

• The name of the creditor and account number

• An itemized amount of the debt owed

• Your right to dispute the debt within 30 days

Step 3: Review the notice carefully

If you don’t believe the debt is yours or think details are inaccurate, you can dispute it .

Step 4: Dispute in writing if needed

You have 30 days to file a dispute. The debt buyer must then verify the debt and provide the name and address of the original creditor . No collection actions are allowed while the dispute is in progress .

Step 5: Check the statute of limitations

If the debt is too old, the debt buyer cannot sue you .

Step 6: Consider your options

• If the debt is valid and within the statute of limitations, you may negotiate a settlement

• If the debt is time-barred, you can request they stop contacting you

• If you’re being sued, do not ignore it—respond by the deadline

Can I request that a debt buyer stop contacting me?

Yes. You can ask a debt buyer to stop contacting you . However, keep in mind :

• This may not stop them from suing you

• They can still report the debt to credit bureaus

• If you want to work out a solution, consider this action carefully

Can I sue a debt buyer for violating my rights?

Yes. If a debt buyer violates the FDCPA or state debt collection laws, you have the right to sue them .

In California, for example, consumers can recover :

• Actual damages from the violation

• Statutory damages between $100 and $1,000

• In class actions, additional damages up to $500,000 or 1% of the debt buyer’s net worth

Do debt buyers need a license?

In many states, yes. For example, Illinois law requires debt buyers to comply with licensing requirements under the Collection Agency Act . California requires debt buyers to include their California license number in written communications .

Where can I report illegal debt buying practices?

File complaints with:

• (CFPB) – consumerfinance.gov/complaint

• Federal Trade Commission (FTC) – ReportFraud.ftc.gov

• Your state Attorney General’s office