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How Does Debt Collection Work?

What to Know About Credit-Card Debt Collection

If you owe credit-card debt, educate yourself with these pointers from Kiplinger about how the whole collections process works and what your rights are.

Year after year, debt collection complaints rank among the most-common consumer grievances the Federal Trade Commission receives. In fact, reports of deceptive debt-collection tactics were the second-most common complaint (after identity theft) that the FTC received in 2011.

"Debt collection is complicated, and some collectors may push the boundaries of the regulations and law to get money out of you," says Bill Hardekopf, CEO of In fact, JP Morgan Chase is being investigated by the government for improper credit-card collections, he says. If you're having trouble paying off your credit-card debt, you need to understand the collection process and know what your rights are.


You have at least 21 days after your credit-card statement date to make a minimum payment. If your payment is late, your card company will report it to the credit bureaus — but you may get up to 60 days if it's your first late payment and you're a good customer, Hardekopf says. That information will remain on your report seven years after the date you first missed the payment.

If your account is 60 days past due, the late payment is noted on your credit report and your credit-card company will turn over your account to its collections department.

If your account is 90 days past due, your card issuer will repeatedly call or send letters and will likely shut down your account.

Beyond the 90-day point, your card issuer will turn over your account to a collections agency or third-party debt collector, which will contact you through phone calls, e-mails and letters, Hardekopf says. The collector can sue you and send you a summons to appear in court. If you don't show up, the collector will automatically win the case and can seize your assets or garnish your wages to pay off the debt.

Read on to find out what you should do if the collectors are bugging you.

If collectors are calling you, Hardekopf says you should . . .

  • Verify the amount and the creditor before making any payments. If you don't recognize the debt, write a letter to the collection agency and creditor to dispute it.
  • Attempt to negotiate a settlement directly with the credit-card issuer first. If that doesn't work, work with the collection agency to develop a realistic payment plan.
  • Check your state's statute of limitations for filing lawsuits to collect credit-card debt. You can have a case dismissed if the suit wasn't filed within this time limit.

Check out these smart stories from Kiplinger:

Why Your Credit-Card Debt Won't Die

6 Ways to Fend Off Debt Collectors

11 Credit Card Mistakes to Avoid

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