Can a Collection Agency Sell Your Debt to Another Agency?

Debt is considered an asset, and like other assets, it can be bought and sold. This practice is a standard part of the financial industry, and understanding how and why debt changes hands is important for anyone who owes money.

Understanding Debt Sale Practices

Creditors sell delinquent debt to collection agencies to clear their books and recover a portion of the outstanding balance. Original creditors, such as banks or credit card companies, sell these accounts at a discount to recoup capital quickly. Debt buyers acquire these debts to collect a higher amount than they paid, generating profit.

When debt is sold, the parties involved include the original creditor and the debt buyer or new collection agency, which purchases the debt. Selling debt is a legal practice within the financial sector, permitted under various consumer protection regulations.

Common types of debt sold include credit card debt, medical bills, and older personal loans. When a debt is transferred, relevant information about the account is passed to the new owner, including the original amount owed, payment history, and debtor contact information.

What Happens When Your Debt Is Sold

Once your debt has been sold to a new collection agency, the new owner must notify you about the acquisition. This notification arrives in writing within five days of their initial communication. The letter should provide the name of the new debt owner, the original creditor, and the total amount currently owed.

After the debt is sold, payments should be directed to the new collection agency, not the original creditor. Selling the debt does not change the amount you owe. Unless new fees or interest are legally added by the new owner, the principal amount remains the same.

Existing payment plans with the original creditor or a previous collection agency may not automatically transfer to the new debt owner. Clarify with the new agency whether any prior arrangements will be honored. Maintain meticulous records of all communications, payments made, and documents received from both the original creditor and any collection agencies.

Your Rights and Actions

When a new collection agency contacts you, you have the right to request validation of the debt. Send a written request to the new agency within 30 days of their initial contact, asking for proof that you owe the debt and that they have the legal right to collect it. The agency must cease collection activities until they provide this validation, including the amount owed, the original creditor, and proof of ownership.

If you believe the debt is inaccurate or not yours, you have the right to dispute it. Send a letter to the collection agency stating your dispute and requesting verification. Send such requests via certified mail with a return receipt. If the agency cannot validate the debt, they must cease collection efforts.

Consumer protection laws establish rules for how and when collection agencies can contact you. They are prohibited from using harassment or making false statements, and have restrictions on contact times and locations. If you wish to stop all communication from a collection agency, you can send a written cease and desist letter. This letter does not erase the debt or prevent the agency from pursuing legal action.

A time limit, known as the statute of limitations, exists for how long a debt can be legally collected through a lawsuit. This timeframe varies, typically three to ten years, depending on the type of debt. Even if a debt is “time-barred,” the debt still exists, and collectors may continue to attempt collection through non-legal means. If you are uncertain about your rights or the validity of a debt, consulting with a consumer law attorney or a credit counseling agency is advisable.