Collection Agency Rights and Laws: What They Can and Cannot Do

Who Regulates Debt Collection Agencies?

Debt collection in the United States is primarily governed by the Fair Debt Collection Practices Act (FDCPA), a federal law enacted in 1977. The FDCPA sets strict rules about how third-party debt collectors can communicate with consumers, what information they must provide, and what actions are prohibited.

The Consumer Financial Protection Bureau (CFPB) is the primary federal agency responsible for enforcing the FDCPA. Additionally, your state attorney general office and state consumer protection agencies can investigate complaints against debt collectors.

It is important to understand that the FDCPA applies only to third-party debt collectors, not to original creditors collecting their own debts. However, some states extend FDCPA-like protections to original creditors as well.

What Collection Agencies Can Legally Do

Collection agencies have the legal right to contact you about your debt by phone, mail, email, and text message, within certain restrictions. They can contact you at reasonable times, generally defined as between 8 a.m. and 9 p.m. in your time zone.

If a debt collector obtains a court judgment against you, they gain additional legal powers. Depending on state law, this can include wage garnishment (typically up to 25% of disposable earnings), bank account levies, property liens, and in some states, driver license suspension.

Collection agencies can also report your debt to the three major credit bureaus, which will negatively impact your credit score. However, the credit bureaus have removed medical debts under $500 from credit reports as of 2023.

What Collection Agencies Cannot Do

The FDCPA prohibits a wide range of abusive and deceptive practices. Collection agencies cannot threaten you with arrest, jail, or legal action they do not intend to take. They cannot use obscene or profane language, call you repeatedly to harass you, or misrepresent the amount or legal status of your debt.

Debt collectors cannot contact you at your workplace if you tell them your employer does not allow such calls. They cannot contact you before 8 a.m. or after 9 p.m. without your permission. Once you send a written request to stop contact, they must cease all communication.

Debt collectors are also prohibited from publishing your name on a debtor list, threatening to seize property they have no legal right to take, and adding unauthorized fees or interest to the original debt. If a collector violates these rules, you may be entitled to damages of up to $1,000 plus attorney fees.

Your Right to Validate the Debt

One of the most powerful rights consumers have is the right to demand debt validation. Within 5 days of initial contact, a debt collector must send you a written notice that includes the amount of the debt, the name of the creditor, and a statement that you have 30 days to dispute the debt.

If you dispute the debt in writing within those 30 days, the collector must stop all collection activity until they provide verification of the debt. This is not a mere formality. The collector must provide actual evidence that you owe the debt.

Many consumers miss this critical window. Our free Debt Validation Letter Generator creates a properly formatted letter that you can send within the 30-day window to protect your rights.

Statute of Limitations on Debt

Every state has a statute of limitations on debt collection through lawsuits, ranging from 3 to 15 years depending on the state and type of debt. Once this period expires, the debt becomes time-barred, meaning the collector cannot successfully sue you to collect it.

Importantly, certain actions can restart the statute of limitations. Making even a small payment, acknowledging the debt in writing, or entering into a payment plan can revive a time-barred debt. Debt collectors often try to get consumers to make small payments on old debts for exactly this reason.

The statute of limitations is separate from the 7-year credit reporting period. A debt can fall off your credit report while still being within the statute of limitations for lawsuit purposes, or vice versa.

How to Report Violations

If a debt collector violates the FDCPA, you have several options for reporting and seeking remedies. You can file a complaint with the Consumer Financial Protection Bureau online at consumerfinance.gov.

You can also report violations to your state attorney general office, your state consumer protection agency, and the Federal Trade Commission. These agencies may take enforcement action against repeat violators.

For significant violations, consider hiring a consumer rights attorney. Under the FDCPA, you can sue a debt collector for actual damages, statutory damages up to $1,000, and attorney fees. Many consumer rights attorneys take these cases on contingency.