Collection agencies can buy debt from creditors, can sue for money | Fact check

Nate Trela, USA TODAY
·3 min read

The claim: It is illegal for collection agencies to buy debt and 'come after you' if you send a cease-and-desist letter

A March 27 Facebook post (direct link, archive link) offers advice for consumers facing debt collection.

“It is illegal for a collection agency to buy your debt and come after you for it,” text on the video reads. “When a debt collector comes after you for debt owed but you already sent a cease and desist letter (sic). Now they owe you 1000 for every time they contacted you.”

The video was shared more than 1,500 times in a week.

More from the Fact-Check Team: How we pick and research claims | Email newsletter | Facebook page

Our rating: False

There is nothing illegal about collection agencies buying debt from third parties and attempting to collect it. The post also misrepresents the protections in place to prevent harassment by debt collectors.

Debts can be sold

The video cites 15 USC 1692, also known as the Fair Debt Collection Practices Act, to support its claims. The act spells out limitations on how debt collectors can try to collect household debt, as well as consumers’ protection from harassment and other abusive collection practices.

However, the video misrepresents what the statute says, according to an expert and guidance from the Consumer Financial Protection Bureau.

Chief among the inaccuracies is the claim that debts can’t be sold to third parties. Dalié Jiménez, a law professor at University of California-Irvine, told USA TODAY that is absolutely false.

“There’s nothing illegal about selling debts to collection agencies – or debt buyers as they would more accurately be called if they're buying,” she wrote in an email. “(It) happens to probably most debts that go unpaid.”

Equifax, one of the largest credit reporting agencies in the country, says creditors transfer or sell debt to collection agencies when they believe they are unlikely to collect the money. These sales are often done for a fraction of the amount owed so the creditor can recover some of the money. They can be done without the consumer’s permission. The collection agency typically notifies the consumer when they acquire the debt and must send a debt verification letter within five days of making initial contact.

Fact check: No, debt isn't 'invalidated' if collection agency doesn't respond to letter in 30 days

Jiménez said it's true that a debt collector could be fined up to $1,000 if they continue to contact a debtor after receiving a cease-and-desist letter. But that protection only applies to third-party debt collectors who were not the original creditor. That means a bank trying to collect on its own loan, for example, is not subject to the restriction.

The $1,000 maximum is also per lawsuit, not per incident as the claim asserts.

The video’s specific wording that the protections apply if the debt collector “comes after you” for debt owed is also misleading, since it "doesn't prohibit the debt collector from suing you – a form of 'coming after you,'" Jiménez said.

Her analysis lines up with a pair of  Consumer Financial Protection Bureau posts laying out what can be done to get a creditor to stop contacting a consumer as well as what actions the creditor can take after receiving a letter. The bureau recommends sending letters to the debt collector via certified mail and paying to get a receipt to prove they were received.

USA TODAY reached out to the social media user who shared the claim for comment but did not immediately receive a response.

Our fact-check sources:

Thank you for supporting our journalism. You can subscribe to our print edition, ad-free app or e-newspaper here.

USA TODAY is a verified signatory of the International Fact-Checking Network, which requires a demonstrated commitment to nonpartisanship, fairness and transparency. Our fact-check work is supported in part by a grant from Meta.

This article originally appeared on USA TODAY: Viral claim misleads on debt collection, harassment | Fact check